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All You Need To Know About How Global Indices Affect The Indian Stock Market

Personal Finance

Investing in the stock market is complex and has risks. It is therefore important to have a sound understanding of how global indices affect the Indian stock market. It is also critical to learn the latest information on how global indices work and how they can affect the prices of Indian stocks. This article will explain what global indices are and how they work, list the 5 major global indices that are most relevant to the Indian market and explore the benefits and disadvantages of using global indices.

What Is A Global Index

Global indices are standards or benchmarks used to track performance. These indices are designed to provide an accurate snapshot of the global economy and they can be traded just like other stocks or currencies.

There are several different types of global indices, but the two most popular ones are the S&P 500 index (an American stock market index) and the FTSE 100 index (a British stock market index). Both indexes contain hundreds of individual stocks from around the world and they have been used by investors for decades to help them make informed decisions about where to invest their money.

The main advantage of using global indices is that they allow you to see how well various sectors in your country or region are performing, relative to others around the world. This allows you to make smart investment choices based on overall trends, rather than solely relying on local information.

Global indices can also provide an interesting perspective on international politics. For example, if a particular country’s stock market shares start declining, it may indicate that underlying economic conditions in that country have deteriorated as well.

How Do Global Indices Work

Global indices are made up of a large number of companies from all around the world. These companies are weighted according to their market share so that the index reflects the overall performance of the stock market as a whole.

When you buy or sell stocks based on global indices, you are buying or selling shares in these companies. This means that your investment is always linked to the performance of the entire stock market, regardless of the country or region.

The main global indices that investors use are the S&P 500, Dow Jones Industrial Average and Nasdaq Composite Index. Though there are other indices, these three represent almost two-thirds of all global assets under management.

How Do Global Indices Affect the Indian Stock Market

Global indices like Standard and Poor’s 500 (S&P 500) and the MSCI World are major drivers of the stock market all over the world. They help track and predict changes in stock prices around the globe, which is why they are considered important for investors.

When a global index increases or decreases in value, this affects the prices of stocks on Indian exchanges too. This is because most Indian companies are listed on overseas exchanges, where their shares are traded in units of global indices. So when global indexes rise or fall, the prices of Indian stocks do as well.

When Indian investors see positive growth trends in global indices, this boosts confidence and leads to greater investment in Indian stocks. Conversely, when global indices show negative trends, this can lead to selling pressures and lower stock prices in India. As a result, investors must monitor global indices closely to stay ahead of the curve.

The Pros and Cons of Using Global Indices

There are many reasons why you might want to use global indices when investing in the Indian stock market.

Advantages of Using Global Indices

The benefits of using global indices include the following: 

  • They provide a more accurate snapshot of the global stock market than local indices. 
  • They provide a more diversified portfolio, which can help you avoid riskier investments. 
  • They offer better price stability than local indices, which means that they tend to remain relatively stable over time, even during volatile periods.
  • They are updated regularly, which means that you always have up-to-date information on which stocks to invest in and the SENSEX today in India.

Disadvantages of Using Global Indices

However, there are also some disadvantages to using global indices which include the following: 

  • You may not be able to get as much exposure to smaller companies or microcap stocks. 
  • You may experience higher fees associated with them than with local indices.

Many major global indices impact the Indian stock market. These indices include: 

  • S&P 500
  • The Dow Jones Industrial Average
  • The NASDAQ Composite
  • Global Dow Realtime USD
  • FTSE 100 Index

Each of these indices consists of a broad range of stocks from around the world, making them a good indicator of how the global market is performing. They are also widely followed by investors, so their movements can have a big impact on the stock prices in India.

The main reason why these indices are important for investors is that they provide a snapshot of how well various industries are performing overall. This information can help you make informed investment decisions in India’s stock market.


If you are interested in how the market will act, it is important to learn the basics of how global indices can affect the Indian stock market. With a better understanding of how global indices, you can determine the strengths and weaknesses of the global market which will help you assess the Indian stock market as well. For more information on stock investment, you can read more informative articles on the Piramal Finance website. When it comes to investing, it is a good decision to get a firm grasp on the essentials of the Indian stock market before investing.