When a newsreader says “the market rose 2% today”, they mean the KSE-100. It is the benchmark index of the Pakistan Stock Exchange: a single number that summarises how the share prices of 100 major listed companies moved, weighted so that the biggest, most freely traded companies count the most.
Which 100 companies?
The index takes, broadly, the largest company from each sector of the market and fills the remaining places with the biggest companies overall by market capitalisation, until it holds 100 names. The list is reviewed and reconstituted periodically — companies that shrink or stop trading actively drop out, and risers come in. Between them, the 100 cover the overwhelming majority of the exchange's total value, which is why the index is a fair shorthand for “the market” even though PSX lists several hundred companies.
Free-float weighting — the part most people skip
A company's weight is based not on all its shares, but on its free float: the shares actually available to trade, excluding holdings locked up with sponsors, directors and governments. A company can be enormous yet carry a modest index weight if most of its register never trades. This is why a giant bank can move the index by hundreds of points in a day (its float is huge and liquid), while an equally large but tightly held company barely registers. Our market overview shows this in action in the contributors table: on 6 November, five heavyweights accounted for most of the index's fall.
Reading a day's move
Three habits separate signal from noise. First, look at points and percent together — at 175,000, a 1,000-point move is only about 0.6%. Second, check breadth: how many stocks rose versus fell (15 up, 85 down on the morning of 6 November told a truer story than the headline -0.85%). Third, check participation: volume and value traded. A rise on thin volume is a rumour; a rise on a billion shares, like Thursday 5 November's 996.99 million, is a decision. The KSE-100 also has siblings worth knowing: the KSE-30 (30 blue chips), the KMI-30 (Shariah-compliant names) and the KSE ALL (everything). Their full family is listed on the market page.
What an index cannot do
An index is an average wearing a suit. Your portfolio can fall on a day the index rises if your stocks are not the heavyweights. And the index says nothing about whether shares are cheap — for that you need its valuation: on 6 November the KSE-100 traded on a trailing P/E of 8.163 with a dividend yield of 6.10%, both shown on our home page. Cheap or expensive is a comparison — against history, against interest rates (12M T-Bills yielded 12.89% that week) and against earnings growth. That comparison is the real work of investing, and the rest of this site is built to help you do it.