My Persian The total index of the stock market should be a true reflection of all the shares/Analysis of all types of indices in the capital market
According to the economic correspondent of Fars news agency, the stock market indices are actually important criteria that can be evaluated from different aspects of the past and present state of the stock market by examining and analyzing them.
Analysis of stock market indices and their fluctuations plays an important role in investors’ decision making. Therefore, capital market activists who may operate based on fundamental analysis, technical analysis, table reading or a combination of these methods, always monitor the market indicators.
There are different types of stock market indices, each of which can convey a part of market information to investors; In the following, we will examine the indices available in the stock market.
* Total TEDPIX index
In Tehran Stock Exchange, the yield index or the price and cash yield index is also known as TEDPIX. This index is the same index that is always mentioned in the news and media as the total index of Tehran Stock Exchange. Total index is one of the most used indices among market participants and investors. This index shows the general level of price and dividends of companies listed on the stock exchange.
According to the calculation formula of the total index, the bigger the companies and the more capital they have, the more impact they will have on the total index. Many experts do not consider this index to be a good indicator for the overall market situation. This issue occurs due to the fact that the total index of the stock market is influenced by large and index-making symbols, and small shares have a small contribution to the changes of this index.
That is, sometimes we see that most of the stock markets are in a declining state, but with the increase in the stock prices of several large companies, the total index becomes positive.
* Total equal weight index in the stock market
In the total equal weight index, the companies admitted to the stock exchange share with equal weight in the calculation of the total index. Therefore, the positive and negative fluctuations of small companies are as effective as the positive and negative fluctuations of large companies in this index.
* TEPIX price index
The price index is also one of the main indices of the stock market. This index shows the general trend of changes in the stock prices of all companies listed on the stock exchange. Unlike the total index, the dividend of companies is not included in this index. For example, if the stock price index has grown by 20% in one year, it means that the general level of prices in the stock market has grown by 20% on average compared to the last year.
The main difference between this index and the general index is that in the price index, only the stock prices of stock companies are calculated in the index formula. If in the total index, in addition to the price, the annual interest paid by the companies is also included in the calculation of the index. In this index, like the total index, the weight of companies is important in their impact on the price index, that is, the bigger the company, the greater its impact on the price index.
* Equivalent price index in the stock market
In the price index of equal weight, the companies admitted to the stock exchange share with equal weight in the calculation of the price index. Therefore, the positive and negative fluctuations of small companies are as effective as the positive and negative fluctuations of large companies in this index.
* TEFIX free floating stock index
Free float shares are a part of the shares of a joint stock company whose owners are ready to offer and sell it. In other words, this part of the company’s shares is expected to be tradable in the near future. The owners of free floating shares do not intend to participate in the management of the company by keeping it.
In order to calculate the free floating shares, the composition of the shareholders should be checked and the strategic shareholders should be identified. Strategic shareholders are shareholders who do not intend to sell their shares in the short term and usually want to keep these shares to exercise their management.
The calculation of the free floating stock index is similar to the total index. with the difference that in weighting the companies in the index basket, instead of using the total issued shares, only the free floating shares of the companies are used. The main purpose of using free floating stocks in the calculation of indices is actually to track the behavior of a part of the market that has more liquidity.
* Other stock market indices
In Tehran Stock Exchange, there are other indices such as industry index, financial index, price index for each industry and price index of 50 most active companies. Each of these indexes is actually a sub-index of the entire capital market.
* Which index is the right indicator for the stock market?
Ali Momeni, a capital market expert, in an interview with the economic reporter of Fars news agency, says about the stock market indices: the total index alone cannot show the stock market trend well. The total index may increase, but the shareholders will not earn a profit in total.
He continued: An increase in the total index does not necessarily mean that the shares of all companies on the stock exchange are profitable. Just as the reduction of the total index does not necessarily mean the loss of shares of all companies in the stock market; The total index represents the average return of the stock market.
This capital market expert emphasized: Investors should not invest in the stock market solely by relying on the growth news of the total index and without fully investigating the intrinsic value of stocks. Investors should be very careful in choosing stocks even in the conditions of continuous growth of the total index.
Momeni clarified: One of the most important principles of investing in the stock market is the formation of a diversified stock portfolio. The more diverse an investor’s stock portfolio is and the closer it is to the combination of stocks of companies in the stock market, the return of that investor will be closer to the average return of the entire stock market as shown by the total index.
* The total stock market index should be a true reflection of all shares
Therefore, according to the report, the audience of Fars news agency registered a campaign titled “The total stock market index should be a true reflection of all shares” in the Fars system.
In the text of this survey, it is stated: “These days, even though the return of the total index of the Tehran Stock Exchange has recorded positive numbers, the portfolio of the small market shareholders shows a different situation. If the index of 30 large companies had been published on the technology management site of the Tehran Stock Exchange, on such days, the significant difference of 5 to 7 percent between the index makers and other market stocks would have been easily recognized. For years, stock market activists and shareholders have been waiting for the index to be modified or new indices to be published. The request of the retail shareholders from the head of the stock exchange organization is to calculate and publish an index that shows the state of market efficiency in a more realistic and accurate way.
Therefore, according to the report, the Fars news agency, according to the mission it has defined for itself regarding the follow-up of Fars subjects, will definitely put the follow-up of this issue on the agenda and will demand an explanation from the authorities.
If you wish, other users can join the signatories of this campaign; When the signatures of this campaign reach 1000 signatures and above, Fars News Agency will definitely follow up on this issue.
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