SHARE PRICE INDEX OF THE KARACHI STOCK EXCHANGE

SHARE PRICE INDEX OF THE KARACHI STOCK EXCHANGE

2. The primary objective of the Index is to have a
benchmark by which the stock price performance can be
compared to over a period of time. In particular, it is
designed to provide investors with a sense of how the
market is performing. Thus, it is similar to other
indicators that track various sectors of the economic
activity such a the gross national product, consumer
price index, etc.
Some major international indices are NYSE, FTSE
(London), NZSE 40, SENSEX 30

5. On November 1, 1991 the KSE 100 Index was
introduced.
It is capital weighted index and consists of 100
companies representing about 86% of market
capitalization of the Exchange.
In November 1994 it was recomposed by the Baring
Securities London and rules were framed for its re-
composition.

6. •ON - LINE COMPUTATION OF THE INDEX
During market hours, prices of the Index scrips, at
which trades are executed, are automatically used by
the trading computer to calculate the KSE-100 Index
and continuously make up-dation on all trading
workstations connected to the KSE trading computer
on real time basis.
The KSE 100 Index re-composed on semi-annually
basis

8. The selection criteria for stock inclusion in the
recomposed KSE 100 Index are:
SECTOR RULE
Largest market capitalization in each of the 34
sector of the Exchange, excluding Open –
end Mutual Fund sector;
CAPITALIZATION RULE
The remaining 66 companies are taken up on
the basis of market capitalization companies
in descending order.

9. A number of the 34 top sector companies may also
qualify for inclusion on the basis of their market
capitalization: i.e. companies may qualify under
Sector Rule or under Capitalization Rule, or under
both. However, in that case the company shall be
included on the basis of Sector Rule.

10. Close-end Mutual Fund
Modaraba
Leasing Companies
Inv. Banks / Inv. Cos. / Sec.
Cos
Commercial Banks
Insurance
Textile Spinning
Textile Weaving
Textile Composite
Woollen
Synthetics & Rayon
Jute
Sugar & Allied
Cement
Tobacco
Refinery
Power Generation &
Distribution
Oil & Gas Marketing
Companies
Oil & Gas Exploration
Companies
Engineering
Automobile Assembler
Automobile Parts &
Accessories
Cables & Electric Goods
Transport
Technology & Communication
Fertilizer
Pharmaceutical
Chemical
Paper & Board
Vanapati & Allied
Leather & Tanneries
Foods & Personal Care
Products
Glass & Ceramics
Miscellaneous

11. SECTOR RULE:
Value-based Rule:
A company which is the largest in its sector by a minimum of
10% in capitalization than the present largest in the sector
(in the index) will enter in the index on re-composition.
Time-based Rule:
A company which is the largest, but not more than 10%
greater in value than the present largest company in the
sector will enter the index after maintaining its position as
largest in the sector for two consecutive re-composition
period.

12. CAPITALIZATION RULE:
Time-based Rule:
A company may qualify for entry if it exceeds the
market capitalization of the last stock in the index
selected on the basis of market capitalization for two
re-composition periods.
A qualifying company automatically pushes out the
lowest capitalization selected stock in the index.

13. RULES FOR NEW ISSUES:
A newly listed company or a privatized company
shall qualify to be included in the existing index (on
day of recomposition) if the market capitalization of
the new or privatized company is at least 2% of the
total market capitalization.

15. VALUE
BASE
Companies largest in its Sector by a
minimum 10% at the last cut off date.
TIME
BASE
Companies which are greater but less
than 10%.
SECTOR BUFFER
Companies will enter the Index after
maintaining its position for last Two cut
off dates.
INDEX

16. TIME BASE
Companies which are amongst the top 66
companies on market capitalization basis.
MARKET CAP. BUFFER
Companies will enter the Index after maintaining its
position for last Two cut off dates.
INDEX

17. Hypothetical Example
Step 1
The Base Period Day 1
Stock Share Price
(Rs.)
No. of SharesMarket Value
(Rs.)
A 20.00 50,000,000 1,000,000,000.00
B 30.00 100,000,0003,000,000,000.00
C 40.00 150,000,0006,000,000,000.00
Total Market Capitalization 10,000,000,000.00
Note: Base Period Value / Base Divisor = Rs.10,000,000,000.00 = 1000.00

18. Step 2
Index Value as on Day 2
Stock Share Price
(Rs.)
No. of SharesMarket Value
(Rs.)
A 22.00 50,000,000 1,100,000,000.00
B 33.00 100,000,0003,300,000,000.00
C 44.00 150,000,0006,600,000,000.00
Total Market Capitalization 11,000,000,000.00
11,000,000,000.00
Index = -------------------------- = 1.10 * 1000 = 1100
10,000,000,000.00

19. The for Calculating the KSE 100 Index is:
Sum of Shares Outstanding x Current Price
----------------------------------------------------------- x 1000
Base Period Value
Market Capitalization
----------------------------------------------------------- x 1000
Base Divisor
OR

20. 11,686.44
1753.82
9,556.61
6,218.40
4,471.60
2,701.42
1,273.07
1507.61408.91
945.24
1339.93
1,497.76
2,049.11
2,164.26
1,243.71
1,000.00
0.00
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
14,000.00
1991199219931994199519961997199819992000200120022003200420052006

21. Change of
Regime Terrorists Attack
in US
(9/11)
Indo-Pak
Tension
Improving
Economy
Improvement in
Indo-Pak
Relations
New Economic Agenda
CVT Levy
S&P upgraded
rating
Nuclear
Tests
Settlement
Crisis
CFS
Implementation 25
Bn
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
4,500.00
5,000.00
5,500.00
6,000.00
6,500.00
7,000.00
7,500.00
8,000.00
8,500.00
9,000.00
9,500.00
10,000.00
10,500.00
11,000.00
11,500.00
12,000.00
12,500.00
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6

22. COMPANY NAME INDEX WEIGHTAGE
O. G. D. C. 23.82
P. T. C. L. “A” 7.30
Pakistan Petroleum Limited 6.50
National Bank of Pakistan Limited 6.48
MCB Bank Limited 4.27
United Bank Limited 3.29
Pakistan Oilfields Limited 2.89
Fauji Fertilizer Company Limited 2.20
Pakistan State Oil Company Limited 2.03
Sui Northern Gas Pipelines Limited 1.93

23. COMPANY NAME INDEX WEIGHTAGE
INFOSYS TECHNOLOGIES 9.50
RELIANCE 8.86
ICICI BANK 7.61
ITC LTD 7.44
HDFC 4.35
HINDUSTAN LEVER 4.35
LARSEN & TOUBRO 4.35
ONGC 4.07
TELEVENTURES 3.97
SATYAM COMPUTERS 3.59

24. FUTURE PLANS
•INTRODUCTION OF KSE-30 INDEX
•The primary objective of the KSE-30 Index is to have a benchmark
by which the stock price performance can be compared to over a
period of time. In particular, the KSE-30 Index is designed to
provide investors with a sense of how large company’s scrips of the
Pakistan’s equity market are performing. Thus, the KSE-30 Index
will be similar to other indicators that track various sectors of
country’s economic activity such as the gross national product,
consumer price index, etc.
•Globally, the Free-float Methodology of index construction is
considered to be an industry best practice and all major index
providers like MSCI, FTSE, S&P, STOXX and SENSEX have
adopted the same. MSCI, a leading global index provider, shifted all
its indices to the Free-float Methodology in 2002