DAX Index: Understanding Germany’s Stock Market Benchmark

In this era of globalisation, where all economies are interconnected, understanding the important stock market indices of other countries has become important. One of the most influential indices in the world is Germany’s DAX Index. This index represents the 40 largest and most liquid German companies listed on the Frankfurt Stock Exchange.

For many investors and traders seeking potential opportunities to trade in European markets, understanding how the DAX futures market operates may unlock potential opportunities to diversify their portfolios.

In this article, we will learn about Germany’s stock market index: DAX, how it is calculated, admission to DAX, its historical performances and how to invest and trade in DAX.

Table of contents

• Germany stock market index: DAX 40 overview
• What is Germany’s DAX 40 index?
• How is the DAX stock index calculated?
• Admission to the DAX
• What drives the DAX index?
• Historical performance of the DAX
• How to invest in DAX
• How to trade DAX 40

Germany stock market index: DAX 40 overview

The DAX Index gives you an insight into the German economy. Also known as the Deutscher Aktienindex, it is considered Germany’s main stock market benchmark. It tracks the performance of 40 of the largest and most liquid companies listed on the Frankfurt Stock Exchange. The index acts as a barometer of the German economy, covering major sectors such as automobiles, financials, technology, pharmaceuticals and industrial manufacturing.

Initially, this index comprised 30 constituents, but was later expanded to 40 in 2021 to make it more diversified and representative of the German economy. During the expansion, companies from emerging sectors such as healthcare, technology and renewable energy were included.

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What is Germany’s DAX 40 index?

As discussed above, the DAX index reflects the economic health of Germany as 40 major companies that influence the German and global economies are listed on it. Unlike some other indices like Dow Jones Industrial Average, which only measure price changes, the DAX 40 Index represents total returns of its constituents, which means it accounts for both price movements and dividend reinvestments.

The DAX is managed and calculated by STOXX Ltd, a subsidiary of Deutsche Börse Group. The index was first introduced on July 1, 1988, under DAX by the Frankfurt Stock Exchange. Since then, it has become a standard indicator for investors tracking the performance of German equities.

How is the DAX stock index calculated?

The DAX Index is calculated using a free-float market capitalisation-weighted method. This means each company’s weight in the index depends on its market value, adjusted for the shares that are available for public trading (excluding insider or government holdings). Capping rules limit the weight of any single stock to 15%.

Admission to the DAX

There are certain criteria on the basis of which companies become eligible for inclusion in the DAX index. The criteria are:

• Free-float market capitalisation is assessed on a specific reference date (the last trading day of each month) and calculated using the volume-weighted average price (VWAP) from the last 20 trading days.
• STOXX releases monthly selection lists that act as the foundation for index review decisions. To appear on these ranking lists, a company must meet the following requirements:
• Be listed on the Regulated Market of the Frankfurt Stock Exchange.
• Have a minimum free float of 10%.
• Maintain its legal or operational headquarters in Germany.
• Report positive EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) for the two most recent financial years to qualify for DAX inclusion.
• Be continuously traded on Xetra.
• Have been listed for at least 30 trading days.
• Regularly publish annual financial statements, half-yearly reports, and quarterly results.
• Comply with specific audit committee requirements outlined in the German Corporate Governance Code.

Additionally, foreign companies may also qualify for DAX inclusion if they have their legal headquarters within an EU or EFTA country or maintain an operational headquarters in Germany.

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What drives the DAX index?

Economic indicators

Data such as Germany’s GDP growth rate, unemployment numbers and industrial production figures can directly impact the index. A strong economic outlook usually supports higher equity prices.

Interest rates and ECB policy

The European Central Bank (ECB) plays a major role in influencing stock markets. Lower interest rates tend to encourage investment in equities, whereas rising rates can make borrowing costlier and reduce corporate profits.

Corporate earnings

Quarterly and annual earnings reports from constituent companies can move the index.

Global economic trends

Since Germany is an export-driven economy, the DAX is sensitive to global trade conditions, supply chain dynamics and currency fluctuations.

Political and geopolitical events

Political changes within the European Union, trade agreements or global conflicts may influence investor sentiment and cause short-term volatility in the DAX.

Historical performance of the DAX

Backtesting shows that in the last 55 years, the DAX index (in EUR) had a compound annual growth rate of 6.94%, a standard deviation of 19.23%, and a Sharpe ratio of 0.41, as of October 2025.

The DAX reached its all-time of 16,427 points on 16 June 2023. On 3 October 2008, the DAX experienced the largest daily gain in its history with 11.40%.

Source: Curvo and Frankfurt Stock Exchange. Past performance may or may not be sustained in future

How to invest in DAX

Although you cannot invest directly in the DAX index itself, there are several alternative ways to gain exposure to it. For example, you may invest in exchange-traded funds (ETFs) that are designed to replicate the DAX’s movements or in mutual funds that might hold the same companies included in the DAX, weighted in proportion to the index’s composition. While there are no such ETFs in India, you may be able to invest in them through international AMCs. However, eligibility criteria, application processes and tax treatment may differ.

How to trade DAX 40

Trading the DAX can be done through instruments such as futures, ETFs or CFDs (Contracts for Difference). The DAX Futures contract is among the most recognised and actively traded derivatives in Europe.

A DAX Futures contract represents an agreement to buy or sell the DAX index at a specific future date and price. The contract is cash-settled, meaning no actual shares are exchanged. Instead, potential gains or losses are settled in cash at the end of the contract.

Conclusion

DAX 40 is one of the prominent indices in the world, reflecting Germany’s economic health. Through instruments like DAX Futures, investors and traders may participate in the movement of one of Europe’s most closely watched indices.

FAQs

Who is responsible for the DAX?

The DAX Index is managed and calculated by STOXX Ltd, which operates under the Deutsche Börse Group. They ensure the accuracy, transparency and integrity of the index and conduct regular reviews of its composition.

What time does the DAX start trading?

The DAX index is quoted during Xetra trading hours, which typically run from 9:00 AM. to 5:30 PM Central European Time (CET).

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.

The content herein has been prepared on the basis of publicly available information believed to be reliable. However, Bajaj Finserv Asset Management Ltd. does not guarantee the accuracy of such information, assure its completeness or warrant such information will not be changed. The tax information (if any) in this article is based on current laws and is subject to change. Please consult a tax professional or refer to the latest regulations for up-to-date information.