Composite Indexes

A composite index measures the combined performance of a group of securities such as stocks, bonds, or sectors. Investors use composite indexes to track market trends, compare returns, and evaluate investment performance against a benchmark index.

• A stock market index combines multiple securities into one calculated value.
• Composite indexes can track broad markets, sectors, industries, or global markets.
• Most indexes use market capitalisation or price weighting to calculate index values.
• Benchmark indexes help you compare your portfolio or mutual fund performance.
• SEBI requires mutual fund schemes to display a colour-coded riskometer ranging from Low to Very High risk.
• You can invest in mutual funds through SIP or lumpsum modes. SIP investments start from Rs. 100 per month on the Bajaj Broking website.

Start your mutual fund investment journey on the Bajaj Broking website — complete KYC online, compare 4,000+ mutual fund schemes, and begin investing through SIP or lumpsum modes on the Bajaj Broking website.

A composite index is a type of stock market index that combines many securities into one number. It helps you understand how a market, sector, or group of investments is performing over time.

For example, a composite index may track the top companies in a country or companies from a specific industry. Instead of checking each stock separately, you can look at one index value.

Composite indexes are widely used in financial markets because they simplify market tracking. Investors, analysts, and fund managers use them to measure performance and compare investment returns.

Different composite indexes track different parts of the market. Some cover the full market, while others focus on sectors, industries, or themes.

SEBI requires mutual fund schemes to display a colour-coded riskometer. Risk levels range from Low to Very High depending on the underlying investments.

AMFI supports transparency and ethical practices across the mutual fund industry, while SEBI acts as the statutory market regulator.

A composite index is calculated using a formula that combines the prices or market values of selected securities. The exact method depends on the type of benchmark index being created.

Most stock market index providers use market capitalisation weighting. Larger companies receive higher weight in the index calculation.

Common calculation methods

Basic calculation process

1. Select the securities included in the index based on predefined criteria.
2. Assign weights using market capitalisation, price, or equal allocation.
3. Calculate the combined value using the selected formula.
4. Update the index regularly based on market price changes.
5. Rebalance the index periodically to maintain accuracy.

Composite indexes help you understand overall market direction quickly. Instead of analysing hundreds of securities, you can study one benchmark index.

They also help you compare investment performance. Many mutual funds aim to outperform a specific stock market index.

Advantages of composite indexes

• Easy way to track market performance
• Useful for comparing portfolio returns
• Helps identify market trends
• Supports passive investing strategies
• Simplifies sector and industry analysis

Investors also use composite indexes when selecting mutual funds on the Bajaj Broking website. You can compare schemes across equity, debt, hybrid, ELSS, and thematic categories.

Composite indexes are useful, but they also have limitations. They may not fully represent every company or investment type in the market.

Some indexes give higher importance to large companies. This can reduce the influence of smaller companies even if they perform well.

A benchmark index also cannot guarantee investment returns. Mutual fund returns remain market-linked and depend on the underlying portfolio managed by the respective AMC.

Investors use composite indexes to compare returns, track risk, and understand market conditions. Fund managers also use benchmark indexes to measure scheme performance.

For example, if an equity mutual fund underperforms its benchmark index for a long period, investors may review whether the scheme still matches their goals.

Common uses of composite indexes

On the Bajaj Broking website, you can track your investments using Dashboard, Portfolio, Orders, and MF Profile tools after completing mandatory KYC verification.

Many well-known stock market indexes are composite indexes because they track groups of securities rather than one company.

These benchmark indexes are commonly used by mutual funds and exchange-traded funds for performance comparison and portfolio construction.

A composite index combines multiple securities into one measurable value. It helps you track market trends, compare investment performance, and understand how different sectors or markets are moving.

Composite indexes also play an important role in mutual fund investing because many schemes measure their performance against a benchmark index. On the Bajaj Broking website, you can explore 4,000+ mutual fund schemes across equity, debt, hybrid, ELSS, and thematic categories after completing SEBI-mandated KYC requirements.