An index is an "average" of stocks calculated by some method. Most indices (including S&P CNX Nifty and BSE Sensex) are computed by Market Capitalisation Weighted Method, meaning that the biggest companies tend to dominate the performance of the index compared to smaller companies.

For example, in order to compose an index consisting of 100 stocks (assuming the initial value of the index to be 100), divide each stock's current price by its price on the first day you created the index and then add it all up (which would give you an answer of 100 of course). Chart this over time and you'll see the performance of that basket of stocks compared to where the average was at the date of inception.

There are two major Stock Exchanges in India, namely Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Both these exchanges have a number of indices representing certain part of the stock market. Various indices of the two exchanges are as follows:

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