Índice de Precios y Cotizaciones (IPC)

The Índice de Precios y Cotizaciones (IPC) is Mexico's flagship stock market index, effectively serving as the Mexican equivalent of the American S&P 500 or the German DAX. Managed by S&P Dow Jones Indices in partnership with the Bolsa Mexicana de Valores (BMV), the IPC tracks the performance of a basket of the 35 largest, most liquid, and most representative stocks traded on the exchange. Think of it as a curated playlist of Mexico's corporate heavy-hitters. When you hear financial news report that “the Mexican market is up,” they are almost certainly referring to the IPC's movement. For investors, the index is the primary benchmark used to gauge the health of the Mexican stock market and to measure the performance of their own investments against it. It provides a powerful, at-a-glance view of investor sentiment and the economic pulse of Mexico's largest public companies.

The IPC isn't just a random collection of companies. It's a carefully constructed index designed to be a true reflection of the market.

The selection of the 35 companies, known as the “sample,” is based on a few key criteria, primarily market capitalization and liquidity.

• Size Matters: The IPC is a market-cap-weighted index. This means that larger companies have a greater impact on the index's value than smaller ones. A 5% jump in the stock price of a corporate giant like América Móvil will move the IPC far more than a 5% jump in one of the index's smaller constituents.
• Tradability is Key: To be included, a company's shares must be actively traded. This liquidity requirement ensures that the index's price reflects real-time buying and selling activity, not just the paper value of illiquid stocks that rarely change hands.

The composition of the IPC is not set in stone. Twice a year, in March and September, the index undergoes a rebalancing. During this review, companies that no longer meet the size and liquidity criteria can be removed, making way for new companies that have grown in prominence. This process ensures the IPC remains a current and relevant snapshot of the most significant players in the Mexican economy.

For a value investor, an index is a tool, not a gospel. Understanding the IPC is less about chasing its daily movements and more about using it wisely.

The IPC serves as an excellent barometer of economic sentiment. A sustained rise often indicates investor confidence in the future of the country's economy, while a prolonged slump can signal underlying problems. A savvy investor pays attention to these broad trends, as they can provide context for the overall investment climate and help identify when Mr. Market is being overly pessimistic or euphoric.

A true value investor doesn't simply “buy the market.” The core philosophy is to buy wonderful businesses at fair prices. From this perspective, the IPC is not a shopping list but rather a high-quality hunting ground.

• A Pre-Screened List: The index provides a ready-made list of 35 of Mexico's most established and significant companies. This saves you the initial work of sifting through hundreds of smaller, more obscure firms.
• Finding Needles in the Haystack: Your job is to analyze the individual companies within the index to determine their intrinsic value. The IPC's level might be at an all-time high, suggesting an expensive market, but there could still be one or two companies within it that are neglected and undervalued. Conversely, during a market crash, the index helps you focus on quality businesses that may have been unfairly punished.
• Index vs. Individual Stocks: You can gain exposure to the IPC passively by buying an Exchange-Traded Fund (ETF) that tracks it. This is a legitimate strategy for diversification. However, this is fundamentally different from value investing, which involves the active, deliberate selection of individual stocks you believe the market has mispriced.

• The IPC is the main benchmark for the Mexican stock market, composed of 35 of its largest and most traded companies.
• It is a market-cap-weighted index, meaning corporate giants have the biggest influence on its day-to-day movements.
• For a value investor, the IPC is a fantastic starting point for research—a curated list of major businesses to analyze for potential investment.
• Your goal is to find value in individual companies, not to blindly follow the ups and downs of the overall index.