NSE launches dynamic asset allocation indices to combine equity, debt

NSE Indices Monday said it has launched two dynamic asset allocation indices, which are designed to tactically combine equity and debt.

The two indices are -- Nifty 50 & short duration debt -Dynamic P/E index and Nifty 50 & short duration debt Dynamic P/B index, NSE Indices, an NSE group company, said in a statement.

Within these indices, the asset allocation between debt and equity is dynamically managed based on a model that compares the current price-earnings ratio (P/E) or price-book ratio (P/B) with historical P/E or P/B ratio of Nifty 50 in the previous seven years.

"The two newly launched Nifty dynamic asset allocation indices employ a dynamic, rule-based asset allocation mechanism, designed to tactically combine equity and debt.

"The unique asset allocation model alters the index's exposure to equity based on whether equity market presently appears to be relatively expensive or cheaper, thereby optimising the risk-return ratio for investors," said Mukesh Agarwal, CEO, NSE Indices Ltd.

He further said that these indices also appropriately fill the gap due to the absence of a relevant benchmark for performance comparison of the popular dynamic asset allocation category offered by mutual funds in the country.