Re: Bulls push Pakistan share index above 8,000-points
AJ bhai...
The index for any exchange, eg DOW for the NYSE, FTSE for UK, SENSEX for Bombay, and KSE-100 for Karachi, is an overall indicator of how things are going. An index is a collection of companies that the market feels define the changes in economy. In other words, they are all strong companies. DOW Jones index works with 30 companies. KSE-100 index works with 100 companies.
Now each company has different weightage with respect to the index, depending on the companys holdings, and impact on economy. eg, if both 'microsoft' and 'abc tech' are on the DOW Jones index, then microsoft would have more weightage, since it is a bigger, better, stronger and more viable company. Meaning, if microsofts stock price goes up by $1, the Dow index might shoot up 10 points as a result. Whereas, if abc tech stock goes up by $1, the index might go up by 1 point only. Meaning, a rise in abc techs price doesnt have that much of an impact on the economy and market as a whole.
In the KSE-100 index, the index weightage is distributed among 100 companies. I dont expect each of the 100 companies to get 1% weightage each, since some are stronger than others, but to have one company with 26% weightage means that if the price of OGDC goes up by Re.1, the index shoots up 40-50 points. PTCL has 14% weightage. The third highest weightage is about 3.75% for a few companies. This give you an idea of the disparity in weightage distribution.
This past thursday, the market ended up by 70 or so points. A look at the leader board showed a total of 4 or 5 companies that closed higher, and OGDC was one of them. Rest were all in the red. Take OGDC out of the equation, and the market would have closed about 200 points lower. That gives you an idea of how misleading this index is. With one company having a volume of 1 billion shares traded, and others lagging behind with volumes in the thousands, its far from a healthy market.