The Asia Index Private Ltd, a JV between S&P Dow Jones Indices and BSE has launched 4 new indices as part of its attempt to enable investors to invest based on parameters like valuation and volatility.
- Each of the four indices includes the top 30 companies, which are selected based on their respective factor scores in accordance with the index methodology.
- The indices are drawn from the constituents of the S&P BSE LargeMidCap index (sub-index of the S&P BSE AllCap index).
The four new indices launched under the umbrella of S&P BSE Factor Indices are:
- S&P BSE Enhanced Value Index
- S&P BSE Low Volatility Index
- S&P BSE Momentum Index
- S&P BSE Quality Index
The S&P BSE Factor Indices are designed to include non-market factors such as value, momentum, quality and low volatility using a transparent and rules-based methodology while ensuring reasonable liquidity.
How these indices will work?
- S&P BSE Enhanced Value Index – It is designed to measure the performance of companies with valuations based on ratios like book value-to-price, earnings-to-price and sales-to-price
- S&P BSE Low Volatility Index – It comprises companies with the least amount of volatility.
- S&P BSE Momentum Index – It is designed to measure the performance of those companies that exhibit persistence in their relative performance.
- S&P BSE Quality Index – It will track high-quality stocks based on returns on equity, accruals ratio and financial leverage ratio.
These indices will be reviewed once in six months.