The primary purpose of a stock market index is to provide a benchmark for measuring the performance of a group of stocks or the overall market. It tracks the price movements of a selected group of companies, representing a particular segment of the economy, such as technology or healthcare, or an entire stock exchange. Indices like the S&P 500, Dow Jones Industrial Average, and NASDAQ Composite allow investors to gauge how well a specific market or sector is performing over time.

Stock market indices also serve as a point of reference for portfolio performance. Investors and fund managers compare their individual investments or funds against an index to see if they are outperforming or underperforming the broader market. For example, a portfolio's performance can be compared to the S&P 500 to assess whether it is providing better or worse returns than the overall market.

Additionally, indices help in creating index funds and exchange-traded funds (ETFs), allowing investors to invest in a basket of stocks that replicate the performance of an index. This makes indices a critical tool in passive investing strategies, where the goal is to mirror market performance rather than trying to beat it.