From Business Standard : 22nd Apr.
Investors may get to bet on various versions of BSEs benchmark index Sensex and its other key gauges soon.
World's leading index provider S&P, which recently entered into partnership with BSE, is planning to launch different versions of BSE indices, which could be based on aspects such as volatility and dividend yield.
For instance, Sensex could have different versions such as low volatility and high-dividend yield but will be structured with the same set of 30 stocks.
So, a low-volatility Sensex could have highest weightage for stocks with enjoy these features.
Its new US-based partner, S&P Dow Jones, has already launched different versions of S&P 500 in America.
In February, S&P and BSE entered into a partnership for maintaining and disseminating indices. The tie up was formed shortly after a similar agreement between BSE's bigger rival the National Stock Exchange (NSE) and S&P ended.
It is not just a case of having an index to represent particular size or segment of the market. But now it has moved onto investing strategy -- having different versions of the same indices, said John Davies, vice president - global head of exchange traded products, S&P Dow Jones Indices. You can have different flavours for the BSE suite of indices and that's before you go anywhere near and try to bring in more international products.
Davies didn't specify when the indices would be introduced.
Over the next few weeks, a number of people are coming over from New York and London to visit BSE to discuss different aspect of the existing index business and how we can integrate S&P Dow Jones Indices international practices and expertise into what's relevant for the Indian market, he said.
The methodology to form different versions of the same index are simple, said Davies.
Low volatility version is very straightforward. We take the stocks, we look for top low volatility stocks, and then inversely weight them in the basket. It is simple mechanism, it compressed the volatility and you can still participate in the performance of the underlying.
The recent spike in the market volatility saw a lot of money moving into the low-volatility and dividend yield versions of S&P 500s.
Also, these two tweaked versions had outperformed the S&P500 index in the past one year.
Brokers said different versions of a more board-based index like the BSE 200 or BSE 500 would be more efficient than having more variants of the 30-share Sensex.
Davies said that a 'full toolkit' of ETF products that provide exposure to all the segments like fixed-income, equity and commodities needs to be developed for the Indian market.
As the investment attitude and culture evolves, other asset classes will be required to part of the portfolio, he said.
Investors may get to bet on various versions of BSEs benchmark index Sensex and its other key gauges soon.
World's leading index provider S&P, which recently entered into partnership with BSE, is planning to launch different versions of BSE indices, which could be based on aspects such as volatility and dividend yield.
For instance, Sensex could have different versions such as low volatility and high-dividend yield but will be structured with the same set of 30 stocks.
So, a low-volatility Sensex could have highest weightage for stocks with enjoy these features.
Its new US-based partner, S&P Dow Jones, has already launched different versions of S&P 500 in America.
In February, S&P and BSE entered into a partnership for maintaining and disseminating indices. The tie up was formed shortly after a similar agreement between BSE's bigger rival the National Stock Exchange (NSE) and S&P ended.
It is not just a case of having an index to represent particular size or segment of the market. But now it has moved onto investing strategy -- having different versions of the same indices, said John Davies, vice president - global head of exchange traded products, S&P Dow Jones Indices. You can have different flavours for the BSE suite of indices and that's before you go anywhere near and try to bring in more international products.
Davies didn't specify when the indices would be introduced.
Over the next few weeks, a number of people are coming over from New York and London to visit BSE to discuss different aspect of the existing index business and how we can integrate S&P Dow Jones Indices international practices and expertise into what's relevant for the Indian market, he said.
The methodology to form different versions of the same index are simple, said Davies.
Low volatility version is very straightforward. We take the stocks, we look for top low volatility stocks, and then inversely weight them in the basket. It is simple mechanism, it compressed the volatility and you can still participate in the performance of the underlying.
The recent spike in the market volatility saw a lot of money moving into the low-volatility and dividend yield versions of S&P 500s.
Also, these two tweaked versions had outperformed the S&P500 index in the past one year.
Brokers said different versions of a more board-based index like the BSE 200 or BSE 500 would be more efficient than having more variants of the 30-share Sensex.
Davies said that a 'full toolkit' of ETF products that provide exposure to all the segments like fixed-income, equity and commodities needs to be developed for the Indian market.
As the investment attitude and culture evolves, other asset classes will be required to part of the portfolio, he said.
