What is KSE-100 Index and How to Calculate Indices:

A common question is asked in Pakistan Stock Market is " Kya Diyhan Hai Market Ka " ? However no specific answer, when the person is referring, what is the likely levels of the KSE-100? The KSE-100 is benchmark index which capture’s the general idea of the market movement. When the KSE-100 index consistently moving upwards for a longer period of time, its referred as TEZI in (Bull Market) local phrase. On the other hand, if the KSE100 are consistently moving downwards then it is generally referred to as a MANDI (Bear Market).

But what exactly is the KSE-100 and what do this indicates? How to trade the markets when the KSE-100 is going up and how to trade the market when the KSE-100 is going down? Indices are an important part of the stock market.  Here’s why we need stock indices.

As we have seen earlier, KSE-100 is a benchmark index for Pakistan Stock Exchanges. Some similar stocks are selected and grouped together to form an index. This classification may be on the basis of the industry the companies belong to, the size of the company, market capitalization or some other basis.

Market Cap Weight-age:

Market capitalization is the total market value of a company’s stock. This is calculated by multiplying the share price of a stock with the total number of stocks floated by the company.

Price Weight-age:

In this method, an index value is calculated on the basis of the company’s stock price, and not market capitalization.

Composition of KSE-100 index:

• The idea of an index is that the index should be broadly reflective of the overall Pakistan economy.
• Representation from all sectors of the PSX and includes the largest companies on the basis of their market capitalization.
• Represents over 85% of the market capitalization of the Exchange.
• KSE-100 Index is based on the free-float methodology that means only shares that are freely traded will be included in the calculation of the index values.
• The KSE-100 index is weighted based on market capitalization. The market cap is the product of the price of the stock and the number of shares of free float available. Greater the market cap, greater is the impact of the stock price movement on the KSE-100.

Azee Securities  through  its  daily  market  commentary  gives  the  highlights  of the major stocks contributors in 100-Index movement.

 
Globally, the performance of stock markets is judged by the performance of the indices. Dow Jones in the US, FTSE in the UK, DAX in Germany, Nikkei in Japan and Hang Seng in Hong Kong are the equity benchmark indices. For Pakistan, it is the KSE-100 Index!