An index number provides a measurement of relative change over time or between places by comparing values to a base period or place. The Consumer Price Index (CPI) measures the average change in prices over time of consumer goods and services purchased by households. It indicates periods of inflation when prices rise quickly or deflation when prices fall quickly. The Wholesale Price Index (WPI) measures average price changes of goods sold wholesale between industries. Stock price indexes like the NIFTY 50 and SENSEX 30 track the performance of the largest companies on the National Stock Exchange and Bombay Stock Exchange respectively to assess changes in the stock market.

1. INDEX NUMBER
A number that expresses the relative change in price, quantity or value compared to a base
period.
According to Wessel, Willet &Simone:-
Index number is a special type of average that provides a measurement of relative change from
time to time or place to place.
Special-Purpose Indexes
Many important indexes are prepared and published by private organizations. Financial
institutions, university research boards etc. are often prepare indexes on employment, factory
hours and wages and retail sales for the regions they serve. There are many special purpose
indexes. Here are a few examples,
The Consumer Price Index (CPI)
The Consumer Price Index (CPI) is a measure of the average change over time in the prices
paid by urban consumers for a market basket of consumer goods and services.
That is a consumer price index (CPI) describes the changes in price level of a consumer
goods and services purchased by households from one period to another
The CPI is calculated by taking price changes for each item in the predetermined basket of
goods and averaging them; the goods are weighted according to their importance.
CPI is one of the most frequently used statistics. CPI is used to assess price changes associated
with the cost of living. CPI is one of the most frequently used statistics for identifying periods of
inflation or deflation. This is because large increase in CPI during a short period of time typically
denotes periods of inflation and large drops in CPI during a short period of time usually mark
periods of deflation.
How is the CPI used?
The CPI affects nearly all Americans because of the many ways it is used. Following are major
uses:
 As an economic indicator.
 As a deflator of other economic series.
 As a means of adjusting dollar values.
 Used to make adjustments to cash flow mechanisms & setting monetary policy.

2. The Wholesale Price Index (WPI)
The Wholesale Price Index (WPI) is designed to measure the change of price in the primary
and wholesale markets. Wholesale price indexes (WPIs) calculate monthly to understand the
average price changes of goods sold in bulk. Some countries (like Philippines) use WPI changes
as a central measure of inflation. Now India has adopted CPI to measure inflation. The purpose
of the WPI is to monitor price movements that reflect supply and demand in industry or
economy. This helps in analyzing both macroeconomic and microeconomic conditions.
Stock Price Index
Stock Price Index is a statistical measure of the state of the stock market, based on the
performance of certain stocks. It is a tool used by investors and financial managers to describe
the market, and to compare the return on specific investments. A 'national' index represents the
performance of the stock market of a given nation. National Stock exchange-NSE and the
Bombay Stock Exchange- BSE are the two most significant stock exchanges in India.
National Stock Exchange - NSE NIFTY
National Stock Exchange of India Limited (NSE) is the largest stock exchange in India and the
third largest in the world in terms of volume of transactions. It is located in Mumbai It was
incorporated in November 1992 as a tax-paying company. In April 1993 NSE was recognized as
stock exchange under the Securities Contract Act 1956.
NSE index called NIFTY and it is based on the performance of the 50 largest traded
stocks on the national Stock Exchange from different sectors.
Currently, NSE has the following major segments of the capital market:
Equity or capital markets, Futures and options or derivatives market, Wholesale debt market,
Mutual funds, Initial public offerings and so on.
Bombay Stock Exchange – BSE SENSEX
BSE or Bombay Stock Exchange is the oldest stock exchange in Asia. It was established in 1875
and BSE is located at Dalal Street, Mumbai.
BSE index called SENSEX (SENSitive indEX), also called the "BSE 30". It is based on
the performance of the 30 largest traded stocks on the Bombay Stock Exchange from different
sectors.
If the SENSEX goes up, it means that the prices of the stocks of most of the major companies
on the BSE have gone up. If the SENSEX goes down, this tells you that the stock price of most
of the major stocks on the BSE have gone down.