Definition

FTSE 100 Index

What is FTSE 100 Index?

The FTSE 100 index represents the share index of 100 largest public companies of UK trade on London Stock Exchange with the highest market capitalisation. The FTSE 100 index stands for Financial Times Stock Exchange 100 Index, and it is also known as Footsie. The FTSE Index was created in January 1984, maintained by FTSE Russell Group and owned by the London Stock Exchange. 

Summary
  • FTSE 100 index represents the share index of 100 largest public companies of UK trade on London stock exchange with the highest market capitalisation.
  • The Financial Times Stock Exchange is also known as FTSE Russell Group specializes in giving index offerings for the global financial markets.
  • The FTSE 100 companies listed on London Stock Exchange ranked on the basis of their market capitalisation.

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Understanding FTSE 100 Index

The Financial Times Stock Exchange 100 Index (FTSE 100 index) refers to the share index of 100 blue chip companies of UK which are listed on London Stock Exchange with the highest market capitalisation. The FTSE is also known as FTSE Russell Group, which specialises in giving index offerings for the global financial markets. The FTSE 100 index is the good portent of the performance of the listed companies. Both the Financial Times and the London Stock Exchange has fifty-fifty ownership that is why it is called FTSE 100 and is now owned and maintained by the London Stock Exchange.

The FTSE 100 companies listed on London Stock Exchange are ranked on the basis of their market capitalisation. The total market capitalisation of a company changes with the shares price the company throughout the trading day. Therefore, index value also changes. The global financial markets use FTSE 100 index as a benchmark, which is unofficially called Footsie.

Frequently Asked Questions (FAQs) 

What are the Top 5 companies of FTSE 100 Index?

These are the tops five companies of FTSE 100 index as of 01 January 2021 includes:

  1. ROYAL DUTCH SHELL

Founded in 1907, Royal Dutch Shell with its headquarters at Haagse Hout, The Hague,? Netherlands, is as oil and gas company. On 1 January 2021, the company recorded a market capitalisation of US$136.150 billion.

  1. HSBC HOLDINGS:

Founded in 1865, HSBC Holdings, with its headquarters in London, is an investment bank and financial services company with a global network of 3,900+ offices in 65 countries. On 1 January 2021, the company recorded a market capitalisation of US$105.160 billion.

  1. UNILEVER GROUP:

Founded in 1929, Unilever, with its headquarters in London, is one of the largest FMCG company in the world. It has three main segments of products including beauty & personal care, home care, foods & refreshment. On 1 January 2021, the company recorded a market capitalisation of US$157.180 billion.

  1. BHP GROUP:

Founded in 1885, BHP Group, with its headquarters in Australia and London, the company is engaged in the business of metal, mining and petroleum. On 1 January 2021, the company recorded with the market capitalisation of US$165.000 billion.

  1. ASTRAZENECA PLC

Founded in 1999, AstraZenca Plc, with its base in Cambridge, is a pharmaceutical and biotechnology company. On 1 January 2021, the company recorded a market capitalisation of US$130.990 billion. The company is the one of the top 5 companies in the world, which collaborated with the University of Oxford in the advanced phase of Covid-19 testing and launched Phase III  trials.                                                                              

What factors affect the FTSE 100 index price

The FTSE 100 index get affected by government’s monetary policy, geopolitical factors, and other issues specific to the company, sector. The major factors can be summed up: 

  1. Economic events: Economic Events like Brexit referendum affected the price of the index. Since 23 June 2016 referendum, the FTSE 100 has directed to move opposite with the pound.
  2. Exchange rates: The index price gets affected by the fluctuating exchange rates because its constituents earn huge income in foreign countries.
  3. News releases: There are certain news related to an industry or specific sector that affect the global financial market by dragging the index prices low or high.
  4. Earnings reports: Stock valuation may affect the FTSE index price of a company or its FTSE constituents. Positive or negative earnings of a company can have dramatic impact on the price and performance of an index.
  5. Commodity prices: Around 15% of companies on FTSE 100 are commodity stocks, when commodity stock prices fluctuate, it affects the index price deeply.

 

What is the significance of FTSE 100 index?

There are the several reasons that show the significance of FTSE 100 index:

  • The FTSE 100 index shows the performance of the listed companies globally.
  • It helps investors to take decision by measuring how the companies perform in the global financial market.
  • The index is used as the benchmark for global financial market.
  • The index can be used by the investors to measure the performance of a certain sector or region such as Asia, Europe.
  • Fund managers use FTSE index for investing pension by buying shares in FTSE 100 companies.
  • FTSE index price helps in comparing the performance of the company with its constituent by tracking their past performance.

How to calculate FTSE 100 index?

FTSE 100 index’s total market value is computed by multiplying the share price with the total number of shares issued by a company. The FTSE companies ranked on the basis of their market capitalisation.

The FTSE 100 index is computed by weighing all stocks listed on the LSE by market capitalisation. The FTSE 100 index companies have the highest market capitalisation that represents the higher weight in the index and stocks that have a high impact on the FTSE 100’s price. Trading hours of the FTSE 100 are 8 am to 4.30 pm (BST).