Looking for the answer to the question below related to Financial Management ?
The NSE – Nifty’s base period is
Options:
| A. 1992 B. 1995 C. 1993 D. 1994 |
The Correct Answer Is:
- B. 1995
The correct answer is B. 1995. The base period for the NSE (National Stock Exchange) Nifty index is indeed 1995. This base year is a critical reference point for calculating and tracking the performance of the Nifty index over time. Let’s explore why option B is the correct answer and why the other options (A. 1992, C. 1993, and D. 1994) are not accurate:
Why Option B (1995) is Correct:
1. Base Year Definition:
The base year in the context of an index like Nifty refers to the starting point or reference year from which the index’s value is calculated. In the case of Nifty, the base year is 1995.
2. Calculation of Nifty:
The Nifty index is a market capitalization-weighted index that tracks the performance of the 50 largest and most actively traded stocks on the National Stock Exchange (NSE) of India. The index value is calculated based on the market prices of these 50 component stocks.
3. Comparison Over Time:
The choice of a base year, in this case, 1995, allows investors and market participants to compare the performance of the Nifty index over different time periods. The index value in the base year is set to a specific value (usually 1000 or 100) for ease of comparison. Subsequent changes in the index value reflect the relative performance of the component stocks compared to their values in the base year.
4. Historical Perspective:
Having a base year provides a historical perspective on how the Indian stock market has evolved. It allows analysts and investors to gauge the market’s growth, volatility, and trends over the years.
Why Option A (1992) is Not Correct:
Option A, “1992,” is not the correct answer because it does not correspond to the base year of the Nifty index. The Nifty base year is 1995, as officially recognized by the National Stock Exchange (NSE). The choice of the base year is determined by the index provider and is based on various factors, including the relevance of the year in reflecting the market’s composition and characteristics.
Why Option C (1993) is Not Correct:
Option C, “1993,” is also not the correct answer because, once again, it does not align with the actual base year of the Nifty index. As mentioned earlier, the Nifty’s base year is 1995, and this reference year is used consistently for calculating and tracking the index’s performance.
Why Option D (1994) is Not Correct:
Option D, “1994,” is not the correct answer for the same reasons as options A and C. The base year for the NSE Nifty index is 1995, not 1994. The Nifty index, being one of the most widely followed stock market indices in India, maintains a consistent base year to ensure accurate comparisons and analysis of market performance.
In summary, the base year for the NSE Nifty index is 1995. This reference year serves as the starting point for calculating the index’s value and allows for meaningful comparisons of market performance over time. Options A, C, and D are not correct because they do not align with the actual base year recognized by the NSE for the Nifty index.
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