Why are market indexes important?
A market index is very important because one, it acts as a barometer for market behaviour, and two, it helps in benchmarking portfolio performance. For a particular category of mutual funds called the index funds, these indexes are used for passive fund management i.e. all a fund manager has to do to manage his portfolio is blindly follow the composition of the index. The role of a good index is to reflect the state of the overall market at every moment and indicate how the stock market perceives the Indian corporate sector to fare.
