Delhi Exchange Planning New 70-Scrip Index

The Delhi Stock Exchange (DSE) is planning a new 70-scrip index in which all segments of the industry will be well-represented. It currently has only one index consisting of 33 scrips, which was revamped in the first half of last year.

The index is being planned on the recommendations of Credit Rating & Information Services Ltd (Crisil), which has conducted a study for the bourse, DSE executive-director S S Sodhi told Business Standard.

The broad-based index is considered imperative for introduction of modified carry-forward trade on the exchange.

"A narrow index cannot be a reliable indicator of the market. For example, if the index is dominated by shares of export-based companies, it will shoot up if exports are doing well, although the companies focusing on the domestic market may not be doing too well.

A larger index can correct such distortions," said Sodhi. With a broad-based index, trading becomes more spread-over if the market is booming, says Sodhi.

"At times like this, a broader index will be more representative and portray a more accurate picture of the market," said Sodhi. But, he said, an index should not have too many scrips.

"It may not move at all," he pointed out.

The new scrip will consist chiefly of highly-traded shares. The constitution of the index will depend on the recommendations of the committee set up by the DSE board to chalk out a plan for revamp of the specified group.

According to the recommendations of the committee, the specified group of Delhi Stock Exchange would have all the top 50 scrips by way of turnover at the DSE, Bombay Stock Exchange, National Stock Exchange and Calcutta Stock Exchange.

The committee's report would be discussed by the DSE board at its next meeting.

The present benchmark of the exchange - the 33-scrip index - was revamped last year by exchanging highly active scrips from other sections with lowly-traded shares in the forward group.

The index covers 28 industry segments.

Software at the exchange is currently being upgraded for launch of the new index.