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Market Intelligence › Basic Terminologies
How each company's weight is decided in Nifty and Sensex
Published by The Retail Trader · AUG 05, 2026 · Market Structure
An index is a number that represents the whole market or a sector. Each company's share in that number is not equal, and this entirely determines its behaviour.
An index is often built on free float market capitalisation — that is, only the shares that actually trade in the market are counted. Shares held by the promoter do not count towards it.
So a large company can have a lower weight in the index if a big part of it is held by the promoter.
These things follow from this structure:
• A few big names make up a large part of the index's movement.
• The index can be up while most stocks are down.
• An index fund has to follow the same weights, even if they look expensive.
• On rebalancing days, big volume comes in the stocks entering or leaving the index.
Treating the index as the scoreboard of the whole market often gives a wrong picture. Before comparing your portfolio with the index, check what kind of stocks that index's weight sits in — otherwise the comparison is apples to oranges.
This article is for educational purposes only — it is not a buy or sell recommendation, makes no guaranteed-return claim, and is not advisory. Rules, rates and mechanics are changed from time to time by the exchanges, SEBI and RBI, so verify every number yourself with your broker or an official source.