A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is an imaginary portfolio of securities representing a particular market or a portion of it. Each index has its own calculation methodology and is usually expressed in terms of a change from a base value. Thus, the percentage change is more important than the actual numeric value.
The S&P Nifty 50 is one of the world's best known indexes, and is the most commonly used benchmark for the stock market. Other prominent indexes include the Sensex.
The 50 stocks that were most favoured by institutional investors. Companies in this group were usually characterized by consistent earnings growth and high P/E ratios.
An index future is a derivative, similar to a stock future, whose value is dependent on the value of the underlying, in this case, the index like the S&P CNX Nifty or BSE Sensex. By trading in index futures, a trader is buying and selling the basket of stocks comprising the index, in their respective weights. Stock index futures are traded in terms of number of contracts. Each contract would be to either buy or sell a fixed value of the index. The value of the contract would be the lot size multiplied by the index value. Nifty futures are index futures where the underlying is the S&P CNX Nifty index. In India, index futures trading commenced in 2000 on the National Stock Exchange (NSE).
You enter into a Nifty futures contract at a specified index value. On the expiry of the contract, the investor's profits would be the difference between the level of the index on expiry and the level specified in the futures contract at the time of purchase.
Basic specifications are as mentioned below: