Bourses push ahead with index launches

Recently, NSE launched a strategy-based index of 30 stocks, while BSE is set to revamp its entire family of indices, starting April

Stock exchanges are aggressively expanding their index portfolio, to expand their revenue pie and to stand out in the market.

The National Stock Exchange (NSE) and the BSE have introduced a host of new indices this year. Recently, NSE launched a strategy-based index of 30 stocks, while BSE is set to revamp its entire family of indices from April.

India Index Services (IISL), NSE's index providing arm, has launched the NSE Quality 30 index, comprising the top 30 quality companies, identified on the basis of a quality score. This score would choose companies based on high return on equity, a low debt to equity ratio and year on year growth in profit after tax over the past three years, the exchange said last week.

“The index will be available for the launch of exchange-traded funds and other structured products,” it said on the launch.

Earlier in the month, BSE’s index provider, Asia Index Private (AIPL), launched a new set with the introduction of 16 equity indices, to be operational from next month These 16 consist of the S&P BSE AllCap Index family, further divided into five size-based indices and 10 other sector-based equity indices.

The S&P BSE AllCap Index will comprise the S&P BSE LargeCap, S&P BSE MidCap, S&P BSE LargeMidCap, S&P BSE SmallCap and S&P BSE MidSmallCap. 

The 30-share S&P BSE Sensex and the 50-stock CNX NSE Nifty are the two benchmark indices of Indian equity markets.

“As passive investing grows in India, different indices will be demanded to cater to diverse appetites but that does not take away from the popularity and use of existing ones. Sometimes, they fill an immediate market requirement and can tap into an appetite for a specific and theme-based investment tool,” said AIPL, in response to an email query.

An NSE spokesperson said index development would now revolve around on strategies, rather than only sectors or market capitalisation.

One of the focus areas for us is strategy indices. Selection of stocks in strategy indices are based on factors such as company fundamentals, statistical parameters such as alpha, beta, volatility, etc...We will continue coming up with new indices suiting the investor needs,” said an NSE spokesperson, in an emailed response.

Exchanges are also looking at innovation in stocks within the indices. BSE recently announced the inclusion of shares with differential voting rights (DVRs) into the main indices. At the next index review in June, companies whose DVRs qualify for inclusion will be added. This has led to a spate of activity among companies looking to raise capital without having to dilute their stake, market participants said.