An index follows a specific market, sector, asset-class, concept or a combination of all or some of these to provide a unique, measurable number to investors. This number helps to trace and summarize movements for that selected combination.
Investors should note that indices are highly customized offerings and are based on complex calculation mechanisms. Indices can also be traded through other financial products such as Futures, Options, ETFs, etc., which adds another layer of complexity to trading index products.
It is important to understand the underlying computation, identify the dependencies and consider extreme case scenarios before making any choices or investment decisions.