BSE Index Services, the indexing arm of the Bombay Stock Exchange, has introduced four new factor-based indices to offer investors more structured ways to track distinct investment styles within the large-cap universe. These indices are derived from the BSE 100 large-cap total market capitalisation (TMC) universe and come with a 5% cap on individual stock weights.
Overview of the New Indices
- BSE Large-Cap 100 Momentum 30 IndexThis index comprises 30 companies demonstrating strong and consistent price momentum. Both selection and weighting are based on momentum scores.
- BSE Large-Cap 100 Low Volatility 30 Index
Focused on stability, this index includes 30 companies with the lowest price volatility in the BSE 100 universe. Stocks with lower volatility are given higher weights. - BSE Large-Cap 100 Enhanced Value 30 Index
This index features 30 large-cap companies that appear attractively valued. Constituents are selected and weighted using value scores built on key valuation metrics. - BSE Large-Cap 100 Quality 30 Index
Tracking companies with strong financial fundamentals, this index includes 30 firms that score high on quality metrics such as steady earnings and financial strength. Weighting is determined through quality scores.
Index Structure and Methodology
All four indices:
- Undergo quarterly reconstitution
- Have a base value of 1,000
- Use June 20, 2005 as the first value date
- Apply additional liquidity filters to ensure tradability
- Follow a score-based approach for both selection and weighting rather than traditional market-cap weighting
Significance of the New Indices
These factor-based indices open up new opportunities for investment products and strategies. They can be used by asset managers to create passive offerings such as index funds and ETFs, and may also serve as benchmarks for portfolio strategies aligned with momentum, value, low volatility, or quality factors.
For retail investors, the indices provide a clearer framework to understand and access different stock-selection approaches within the large-cap segment.
Conclusion
With the introduction of these four factor indices, BSE enhances its toolkit for investors and fund managers seeking transparency, structure, and diversification in factor-driven investing. The new indices aim to support broader participation and facilitate more informed investment decisions in the large-cap market.
Disclaimer:
This article is intended solely for educational and informational purposes. The securities or companies mentioned are provided as examples and should not be considered as recommendations. Nothing contained herein constitutes personal financial advice or investment recommendations. Readers are advised to conduct their own research and consult a qualified financial advisor before making any investment decisions.
Investments in securities markets are subject to market risks. Please read all related documents carefully before investing.