Global market indices track the performance of stock markets across different regions, offering insights into overall market trends. They represent a selection of stocks from various countries, providing investors with a benchmark for evaluating international markets. For example, the MSCI World Index tracks mid-cap and large-cap equities across 23 developed nations, covering approximately 85% of the free-float-adjusted market capitalisation. Other key global indices include the S&P 500, FTSE, CAC, DAX, Nifty, and Sensex. These indices help investors compare market movements, assess economic conditions, and make informed decisions based on worldwide trends.

Global market indices serve as indicators of overall market health and economic performance. They act as a benchmark for investors, helping them assess stock market trends across regions. By tracking the movement of these indices, investors can gauge market sentiment, identify growth opportunities, and diversify their portfolios. Many countries use global indices as a reference for their own markets. Additionally, index-based exchange-traded funds (ETFs) allow passive investment strategies, giving investors exposure to a broad range of international stocks while reducing risks associated with investing in individual securities.

The calculation of global indices follows a structured methodology set by an index committee. The most commonly used approach is the weighted average method, which includes price-weighted and market capitalisation-weighted indices. Price-weighted indices assign equal importance to all stocks, whereas market cap-weighted indices give higher weight to larger companies, ensuring more accurate market representation. Some indices also use free-float weighting, which considers only the shares available for public trading. These methodologies ensure that market indices provide a fair and balanced reflection of stock market performance across global economies.

Investing in global market indices offers several advantages, including portfolio diversification and risk management. By spreading investments across international markets, investors can reduce the impact of local market fluctuations. Additionally, global indices provide access to sectors and industries that may not be available in domestic markets, such as technology, healthcare, and energy. Currency appreciation can also enhance returns when investing in foreign markets. Moreover, index-based investments, such as ETFs, offer a cost-effective way to gain exposure to multiple stocks while minimising risks associated with individual company performances.