If you follow the Tehran market, you have often heard that "the overall index closed green while the equal-weight index stayed red," or the reverse. Both numbers are called "the Tehran Stock Exchange index," yet they measure two different things, and that is exactly why they sometimes move in opposite directions. In this lesson you will learn what each index measures, why they diverge, and above all what that divergence tells you about market breadth and the flow of "real money." This is an intermediate lesson; it assumes you already know the basics of shares, tickers, and the overall index.
Definitions
Index: a single number that summarizes the average price move of a group of stocks, so you can read "the general state of the market" at a glance.
Market capitalization (market cap) of a company: the price of one share multiplied by the total number of shares. A company with a larger market cap is "heavier."
Overall index (TEDPIX), market-cap weighted: an index in which each company affects the result in proportion to its market cap. Large companies therefore dominate. These large companies are nicknamed "index makers" (shakhes-saz), because when they move, the whole index moves.
Equal-weight index: an index in which every company carries the same weight, regardless of size. Here a small company counts exactly as much as the largest company in the market.
Real money (pool-e haghighi): the net inflow or outflow of money from retail (individual) investors into stocks, as opposed to legal entities (institutions, funds, and large bodies). Real-money inflow usually signals broad public appetite for the market.
The mechanism: why weighting changes everything
The only difference between the two indices is this: "how much each company affects the result." In the overall index, a company's weight is set by its market cap. If one large company alone holds half of the market's total value, that single company's move can shift the overall index even if dozens of small companies move the other way. In the equal-weight index, however, every company has an equal share; here it does not matter how large a company is, what matters is "how many" companies rose and "how many" fell. Put simply, the overall index weights "the market's money," and the equal-weight index weights "the number of stocks."
The consequence is clear: the overall index mostly reflects the pulse of a few large tickers (metals, refining, petrochemicals, and large holding companies), while the equal-weight index reflects the pulse of "the body of the market," the mass of small and mid-sized companies. When these two pulses are not aligned, the indices diverge.
A numerical example (hypothetical)
Suppose a small market has only three companies: Company A with a market cap of 900 billion tomans (large), Company B with 80 billion tomans (mid), and Company C with 20 billion tomans (small). The total market cap is 1,000 billion tomans, so in the overall index Company A's weight is 90 percent, Company B's is 8 percent, and Company C's is 2 percent. In the equal-weight index, all three carry the same one-third weight.
Scenario one: Company A rises 10 percent, while Companies B and C each fall 5 percent.
- Overall index: (90% x 10) + (8% x minus 5) + (2% x minus 5), which is roughly plus 8.5 percent. The overall index turns deep green.
- Equal-weight index: the simple average of (10 minus 5 minus 5) divided by 3, which equals zero. The equal-weight index barely moves.
The result: the overall index tells you "the market was good," but in reality two of the three companies were red. If your portfolio held these three stocks in equal weight, you made no gain.
Scenario two (the reverse): Company A falls 5 percent, while Companies B and C each rise 10 percent.
- Overall index: (90% x minus 5) + (8% x 10) + (2% x 10), which is roughly minus 3.5 percent. The overall index turns red.
- Equal-weight index: the simple average of (minus 5 plus 10 plus 10) divided by 3, which equals plus 5 percent. The equal-weight index turns green.
Here the picture is inverted: the overall index is red, yet most stocks rose. A broad rally is under way, and the overall index, because of one large ticker's drop, hides it.
Divergence and its message about real money
Now we can "read" the divergence. Remember two common cases:
- Equal-weight ahead of the overall index (greener, or less red): the rise or resilience is "broad," and most stocks move with the market. This usually comes with real-money inflow and wide retail participation, because retail buyers reach for the mass of small and mid-sized stocks.
- Overall index ahead of equal-weight: the rise is "narrow" and leans on only a few large tickers. Often this reflects institutional buying of the index makers, or the effect of a jump in the dollar on dollar-linked (commodity) tickers, while the body of the market does not follow.
So the divergence of these two indices tells you, before any other news, whether today's market move is "deep" or merely "shallow and driven by a handful of names."
In Iran's market
Both indices are calculated and published in real time by the Tehran Securities Exchange Technology Management Company on the official trading system (TSETMC). The Tehran overall index began in 1990 (1369 in the Jalali calendar) with a base value of 100 and is market-cap weighted, which is why a few large metals, refining, petrochemical, and holding tickers dominate it. The equal-weight index is younger, published to the public since early 2015 (Esfand 1393); because it sees every ticker as equal, it is a better mirror for small and mid-sized companies.
A dated, real example helps: at the market open on Sunday, 12 July 2026 (21 Tir 1405), the overall index fell about 2.49 percent while the equal-weight index fell about 2.08 percent; the equal-weight index's smaller drop pointed to how broad the selling was that session. Note that the raw levels of the two indices (millions of units for the overall index versus a smaller number for the equal-weight index) are not comparable, because they have different starting points and base dates; what is comparable is the "daily percentage change." You can follow the live figures on Sahmino's stock market page.
Common mistakes
- "The overall index is green, so everyone made money." Not necessarily. As we saw in the example, the overall index can be green while most stocks are red and only a few large tickers rose.
- Equating a rising overall index with a healthy market. Sometimes the overall index rises simply because a jump in the dollar lifts dollar-linked (commodity) tickers, not because of a real, broad-based boom.
- "The equal-weight index is always the better index." No. It shows a different angle of the market; it is excellent for gauging breadth, but for measuring the total value of the market, the overall index is the correct yardstick. The two are not rivals, they are complements.
- Comparing the raw numbers of the two indices. That the overall index number is far larger than the equal-weight number carries no valuation meaning; it merely reflects their different base dates and base values.
Summary
The overall index weights "the market's money" and captures the pulse of a few large tickers; the equal-weight index weights "the number of stocks" and captures the pulse of the market's body. When the two separate, they tell you whether the market's move is broad or only a few-ticker affair, and that is your first clue about real-money inflow. Get in the habit of watching both together every day, not just one. In the previous lesson we covered housing as an asset; in this lesson we stepped inside the stock market and learned the tool for reading its pulse. To see where indices fit in a full portfolio, revisit asset allocation.
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