Internal Rate

Economic developments in the world over boost the stock market investments to a great extent. Investors invest on stocks owing to its potential of gaining appreciation in the long run.

The stock market indices serve as a tool to quantify the performance of their stocks in a particular stock exchange. Indices are the main instruments in determining the buying and selling of a particular stock in a given period of time. Indices also serve as a benchmark tools to measure the performance of investment portfolio.

The famous stock market indices are S&P 500, Dow Jones Industrial Average and NYSE composite index. These indices reflect ups and downs of the stock performances and guide investors on their investment decisions.

Kinds of Indices

Stock indices are mainly composed from the respective industries based on certain parameters. The stocks from prominent companies form part of the indices and they reflect the performance of the industries at a given point of time. Small cap companies, big cap companies, blue chip companies, banking sectors, manufacturing sector, automobile sectors, and reality companies are some of the segmentations of indices compositions.

Some of the top indices in the work are:

• Dow Jones Industrial Average (DJ 30)
• S&P 500
• Morgan Stanley Biotech Index
• British FTSE 100
• Hong Kong Hang Seng Index
• German DAX 30
• Australian Aussie 200
• French CAC 40
• Indian BSE Sensex
• Indian Nifty

Stock market indices are the main criteria for both, individual and institutional investors. Mutual funds, insurance companies, foreign institutional investors invest their funds on stocks based on index performance. Indices are composed in such a way that it caters the needs of all type of investors. For example, conservative investors always prefer investing in stocks forming a part of blue-chip companies

. These kinds of stocks are stable as well as less volatile comparing sector based stocks. Likewise, aggressive investors always look for risky stocks as they bring higher returns.

The stock market indices are constantly monitored by investors and financial institutions. Their upward or downward movements assist in taking appropriate investment decisions depending on their trading patterns.

Often indices represent financial health and earning potential of a sector or industry. Stock indices are great indicators of a nation’s economy and often reflect economic development and investment climate. In the globalized economy stock market, indices act as the key instruments to attract foreign investments.