What is index in stock exchange?

The index in a stock exchange refers to the indicator of the overall performance of the exchange. Usually a number of large conglomerates that are listed in the exchange are chosen for the calculation of the Index.

For Ex: The Sensex (Bombay Stock Exchange) comprise of 30 of the top companies in India. Each of these 30 companies has a weightage in the index and the price movement of these companies in either direction can influence the index.