Four New Indices Launched in India

Asia Index Pvt Ltd, a joint venture between S&P Dow Jones and BSE Ltd, launched four new indices.

The four S&P BSE indices will be the enhanced value index, low volatility index, momentum index, and quality index.

current affairsThe Enhanced Value Index, the Low Volatility Index, the Momentum Index and the Quality Index are drawn from the constituents of the S&P BSE LargeMidCap Index, a size sub-index of the S&P BSE AllCap family.

1.The enhanced value index measures the performance of companies with valuations based on ratios — book value-to-price, earnings-to-price and sales-to-price.

2. The low volatility index comprises companies with the least amount of volatility (by standard deviation).

3. The momentum index is designed to measure the performance of companies that exhibit persistence in their relative performance.

4. The quality index tracks high quality stocks based on return on equity, accruals ratio and financial leverage ratio.

The maximum weight of stocks in all four factor indices is capped at 5 per cent while the sectoral composition for the enhanced value index and the quality index is capped at 30 per cent.

The indices are rebalanced every six months — in March and September.

Each index value is calculated on an end-of-day basis, in rupee and US dollar. The indices are backdated from September 16, 2005.

The indices have been launched to provide investors with passive exposure to factors, known as smart beta indices.

Asia Index Pvt Ltd, a joint venture between the S&P Dow Jones Indices and the BSE, offers 32 indices for passive fund management.

Asia Index Pvt Ltd provides indices for the BSE.