In addition to their general role as a summary of market conditions, indices are of great use to the financial sector. They are used to benchmark mutual fund performance; ie to see how a particular fund is performing relative to the broader market.
They are used in creating new financial products called index derivatives (financial products whose value is derived from the level of a particular index).
Also they are used by index funds which invest passively in the stocks of a particular index instead of trading actively.
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