S&P may bring in products based on global indices

Indian investors may soon be able to invest in S&P-500 index. If that is not enough, they may also get to invest in BRIC (Brazil, Russia, India and China) markets. These choices are going to be made available to Indian fund houses by S&P’s index services division through IISL (India Index Services).

Talking to Business Standard, S&P index services division Managing Director Robert Shakotko said, “We have observed that when the broader market does not do well, index-based products become popular. This holds true for Indian market as well.”

S&P has decided to work closely with IISL, Crisil’s joint venture with NSE, which offers Index services. “We are planning to hold talks with Indian Assets Management Companies (AMCs) that can offer index-based products to Indian investors,” Shakotko said, adding that the product can be an exchange-traded fund (ETF) based on the S&P 500 index, or BRIC markets’ index, or something like this.

ETF is a passive fund wherein investments are made in index companies as per their individual weightage. In times of uncertainty, betting on indices rather than individual companies helps. Index-based products thus become popular.

Indian AMC Benchmark is going to introduce an index fund based on NSE’s broader index S&P CNX 500 – an index of 500 companies comprising 92 per cent of NSE’s total market cap. Such funds or ETFs can be offered to Indian investors listed in overseas markets.

At present, Indian investors are allowed to invest up to $2 lakh overseas. Many Indian fund houses have introduced schemes for investors to invest in overseas products. So, index-based products can also be offered to investors willing to diversify their portfolios.

S&P has developed many index-related products and the widely-followed VIX (volatility index) of the Chicago exchange is one of them. In India, VIX of NSE is developed under licence from S&P.

Shakotko said they would like to see trading in NSE’s VIX.

Although equity indices are its priority, S&P has commodity index-related products. S&P will provide human resource to IISL and work in close coordination with them to develop and market index-based products in India.

Shakotko said India was fast integrating with global markets and opening up its capital account. This was the right time to introduce more index-based products for Indian investors, he stressed.