UPSC Prelims 2005 · General Studies
Question 73: Economy and Social Development
Consider the following statements :
- 1.Sensex is based on 50 of the most important stocks available on the Bombay Stock Exchange (BSE)
- 2.For calculating the Sensex, all the Sensex stocks are assigned proportional weightage.
- 3.New York Stock Exchange is the oldest stock exchange in the world.
Which of the statements given above is/are correct?
AnswerThe answer is (a).
Statement 2 is accepted: the Sensex is a market-capitalisation-weighted index, so each stock counts in proportion to its market value. Statement 1 is wrong: the Sensex has 30 stocks (the Nifty has 50). Statement 3 is wrong: the oldest stock exchanges are in Europe, such as Amsterdam (1602); the New York Stock Exchange dates from 1792, and the BSE (1875) is the oldest in Asia.
- 1. The Sensex is based on 30 stocks, not 50.
- 2. Weights are in proportion to market capitalisation.
- 3. The New York Stock Exchange is not the oldest; Amsterdam's is older.
Why each option is right or wrong
- (a) Given answer: only statement 2.
- (b) Statements 1 and 3 are false.
- (c) Statement 3 is false: Amsterdam and others are older than New York.
- (d) Rejects statement 2, which the key accepts.
Worth knowing: Statement 2 is loosely worded: Sensex weights are proportional to (free-float) market capitalisation, not equal; the key reads it as true.
Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 2005, General Studies. UPSC's own paper isn't online; the words are from a published compilation. The paper on upsc.gov.in.