CAC

The CAC 40 is the primary benchmark index of the French stock market and one of the most important equity indices in Europe. It tracks the performance of the 40 largest and most actively traded companies listed on Euronext Paris, offering investors exposure to some of France’s most influential and globally recognised corporations.
For global investors—including those in India—the CAC 40 provides insight into the French and broader European economy, with strong representation from luxury, energy, industrials, and financial services.

What is the CAC 40 Index?

The CAC 40 stands for “Cotation Assistée en Continu”, which translates to Continuous Assisted Quotation. It is a market-capitalisation–weighted index that reflects the performance of the top 40 companies listed on Euronext Paris.

The index is:

• Managed by Euronext
• Considered the benchmark for the French equity market
• Widely used by global investors, fund managers, and institutions

The CAC 40 is often compared with other major European indices such as the FTSE 100 (UK) and DAX 40 (Germany).

History of the CAC 40

The CAC 40 was launched in 1987, with a base value of 1,000 points. It was created to provide a transparent and representative measure of the French stock market’s performance.

Over the years, the index has evolved alongside France’s economy and the broader European Union, reflecting changes in corporate leadership, globalisation, and sector dominance—especially the rise of luxury and multinational brands.

How Does the CAC 40 Work?

The CAC 40 is a free-float market capitalisation–weighted index, which means:

• Companies with higher market capitalisation have a greater impact on index movements
  
• Only shares available for public trading (free float) are considered
  
• Large-cap companies can significantly influence the index’s daily performance
  

This structure ensures that the index reflects the performance of the most valuable and liquid French stocks.

Composition of the CAC 40

The CAC 40 consists of 40 blue-chip companies spanning a wide range of industries. A defining feature of the index is its global exposure—many CAC 40 companies generate a significant portion of their revenues outside France.

Key Characteristics

• 40 large-cap French companies
  
• Strong international revenue exposure
  
• Mix of traditional industries and global consumer brands
  

Examples of CAC 40 Companies

• LVMH
  
• L’Oréal
  
• TotalEnergies
  
• BNP Paribas
  
• Airbus
  
• Sanofi

How Companies Are Selected for the CAC 40

Companies are selected for the CAC 40 by an independent scientific committee appointed by Euronext.

Selection criteria include:

• Market capitalisation
  
• Liquidity and trading volumes
  
• Free-float availability
  
• Sector representation
  

The index is reviewed quarterly, and companies may be added or removed to ensure the CAC 40 continues to represent the most significant French stocks.

CAC 40 Sector Weightage

The CAC 40 has a distinctive sector composition compared to other global indices.

Major Sectors

• Luxury & Consumer Goods (a standout feature of the index)
• Energy
• Financials
• Industrials
• Healthcare

Luxury brands such as LVMH and L’Oréal give the CAC 40 a unique exposure that is less prominent in other major indices.

Why Is the CAC 40 Important?

The CAC 40 is important because it:

• Represents the performance of France’s largest companies
  
• Acts as a key indicator of French and European equity markets
  
• Provides exposure to globally competitive multinational brands
  
• Influences investor sentiment across Europe

Movements in the CAC 40 are closely monitored by global investors as a gauge of European market health.

Risks of Investing in the CAC 40

While the CAC 40 offers diversification benefits, it also comes with risks:

• Market risk: Index values can fall during market downturns
  
• Currency risk: EUR-INR fluctuations affect returns for Indian investors
  
• Sector concentration risk: Heavy exposure to luxury and consumer sectors
  
• European economic and political risk
  

Understanding these risks is essential before investing.

Who Should Invest in the CAC 40?

The CAC 40 may suit:

• Investors seeking European market exposure
  
• Long-term global diversification seekers
  
• Investors interested in multinational and luxury brands
  

It may be less suitable for investors seeking high-growth technology exposure or short-term returns.