MCX SX debut in equity segment fails to impress

Exclusion of SBI, real-estate sector from benchmark index SX40 surprises many

The first trading session of equity segment on MCX SX today saw subdued response from members as turnover of only Rs 12.53 crore was recorded. Rival of MCX SX, the National Stock Exchange (NSE) had recorded a turnover of Rs 9 crore on the first day of trading when it was launched in the year 1994.

On MCX SX, Reliance Industries Ltd. today stood to be the top volume generator, while other large cap stocks like State Bank of India, Tata Steel and Cipla were among other top traded counters.

In the cash equity segment, MCX SX saw trades worth Rs 69 lakh while the rest were recorded on the derivative side. There was a problem with MCX SX website as the data did not load also stock brokers said that they could not receive price broadcast for a while during the start of trading session. The exchange said there was a rush to long in the morning which could have resulted into overload on the website.

In the coming days, MCX SX will offer SX 40 its flagship equity index like BSE's Sensex and S&P CNX Nifty of the NSE for trading. However, the exclusion of SBI and real-estate sector from SX 40 has surprised many in the market.

SX 40 is a free-float based index of 40 large-cap stocks. MCX SX has said the index was designed based on ICB, a leading global industry clasification system. ICB, an industry classification taxonomy from global index provider FTSE, is used to segregate markets into sectors within the macroeconomy. SBI, country's largest public sector bank with a market-cap of over 1.53 lakh crore, is used by large institutional investors to bet on India's banking sector and economy, say experts.

Siddarth Bhamre, head--derivatives, Angel Broking said, "For traders, the absence of SBI will not make any major difference because index compositions do not impact short-term trades. But, for investors, it could be a bit of a problem because they structure their large cap portfolios on the basis of indices. If they do not see SBI in the index, they would look at other options. Also, to hedge such a portfolio would result in more number of transactions."

SBI has a 3.72% weight in the 30 share Sensex and 3.16% in the 50 share Nifty index.

MCX SX did not respond to the query on specifies of criteria that could have resulted in exclusion of SBI from the index. However experts say, for a index it is only important to see that a sector is well represented. MCX SX has said that SX 40 would help in structuring passive investment vehicles.

Some of the basis criteria that SX 40 follows for selection of stocks include positive net worth for underlying security, free-float of at least 10% and it should be with in 100 liquid companies. The index has a cap at 20% for a specific sector or industry. Some of the stocks in SX 40 that do not form part of either Sensex or Nifty include United Spirits and Titan.