A stock market index, such as the S&P BSE Sensex or NSE Nifty 50, can be considered as the benchmark to measure and track the movement of a bundle of shares. One may consider the performance of an index as the base point to compare the performance of a sector or group of stocks.
Indices are of two types; broad and sector-specific. Broad indices are constituted by stocks of every sector, for example- BSE Sensex, while sector-specific indices comprise stocks of a given sector, for example - NSE Nifty Bank.
Indices measure the performance (price-based) of baskets of shares with the help of standardized methodology and metric systems. Furthermore, indices exist to aid the measurement of important financial and economic data such as inflation, interest rates in the economy, and manufacturing output.