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Stock exchanges are all geared up to expand their index products portfolio. Both BSE and NSE have introduced new indices this year, with BSE going forward and replacing some of the existing indices.
Recently, the National Stock exchange launched the NSE Quality 30 index – an index comprising the top 30 quality companies, identified on the basis of a quality score. This quality score would choose companies based on their high return on equity (RoE), low debt-to-equity ratio and year-on-year growth in profit after tax over the last three years, the exchange said in a statement last week.
“The index will be available for the launch of exchange-traded funds and other structured products,” said a release from NSE last week announcing the launch of the index.
Earlier in the month, BSE launched a new set of indices with the introduction of 16 equity indices, which will be operational beginning April. These 16 equity indices consist of the S&P BSE AllCap Index family, which will further be divided into five size-based indices, and ten other sector-based equity indices.
The S&P BSE AllCap Index will comprise the S&P BSE LargeCap, S&P BSE MidCap, S&P BSE LargeMidCap, S&P BSE SmallCap and S&P BSE MidSmallCap.
With passive investing expected to grow sharply and rising demand from asset managers for indices to be used as benchmarks, exchanges are keen to tap into this opportunity, officials said.
“As passive investing grows in India different indices will be demanded to cater to diverse appetites but that does not take away from the popularity and use of existing indices. Sometimes they fill an immediate market requirement and can tap into an appetite for a specific theme based investment tool,” said BSE’s index provider Asian Index Private Limited (AIPL) in response to an email query.
Exchanges are also looking at innovation in the index space, with the BSE looking to introduce shares with differential voting rights or DVRs into the main indices. At the next index review to be held in June, companies whose DVRs qualify for inclusion will be added to the index. This has led to a spate of activity among companies looking to raise capital without having to dilute their stake.
Further, the exchange said that it will introduce many more indices going forward in the year.
“We have several projects in the pipeline which will be launched at appropriate times,” said the exchange in the email reply.
