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    Question

    The benchmark indices NIFTY 50 and SENSEX follow which

    methodology for calculating the weightage of constituent stocks?
    A Equal-weight method Correct Answer Incorrect Answer
    B Paid-up Capital method Correct Answer Incorrect Answer
    C Full Market Capitalization method Correct Answer Incorrect Answer
    D Free-float Market Capitalization method Correct Answer Incorrect Answer
    E Authorized Share Capital method Correct Answer Incorrect Answer

    Solution

    Both NIFTY 50 (managed by NSE Indices) and SENSEX (managed by BSE) use a free-float market capitalization–weighted methodology for index calculation. • Free-float market capitalization = Share price × Number of shares available for public trading (excluding promoter holdings, government holdings, ESOPs, etc.). • This ensures that only shares actually available for trading influence the index weight, making the indices more reflective of the market. • Stocks with larger free-float market capitalization carry higher weightage in the index.

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