what is the impact of fluctuations in the share prices of Index companies on smaller companies in the stock ma

Answer 1

The fluctuation of the index companies or bluechip companies as they are called is related to the fluctuation of other smaller companies by the variable called beta. This is the relational movement in price of smaller companies with respect to the fluctuation of bluechips. Beta of bluechips is always 1. Beta is calculated in the process of deriving the Capital Asset Pricing Model (CAPM) based return on stock. Suppose you have X company having a beta of 1.1, which means the combined index moves by 1% the price of the smaller company X moves by 1.1%.

Answer 2

An index would broadly reflect the state of the economy. Companies comprising the index are selected on the basis of their trading volumes, trading frequencies, fundamentals of the companies et al. And economy and corporate performance would be related to each other in a broad way. Now, given this, smaller companies could also show upswings in a buoyant state of the economy and vice versa. In a situation like this, the index companies and the smaller companies could be related. Otherwise, the relationship could be negative as well.

Answer 3

well,index companies gets familiarity easily among the investors because share markets r rated mostly by seeing the progress of index companies.and be clear that whole of odd 6000 and above listed companies in share markets is also rated only by seeing index companies.so once index companies gets slashed means its impact will be also evidenced in small companies also,even though the small companies r doing well if index slashes,it is its fate that this small companies also get into trouble

Answer 4

i lost 2 crore INR .that the impact on me.