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S&P-BSE JV launches Bharat 22 Index

LiveMint logoLiveMint 22-08-2017 Ami Shah

Mumbai: Asia Index Pvt. Ltd, an equal joint venture between S&P Dow Jones Indices LLC and BSE Ltd, announced the launch of the S&P BSE Bharat 22 Index on Tuesday, which is designed to track the performance of select blue chip government companies listed on BSE.

The S&P BSE Bharat CPSE Index comprises of 22 select companies from the central public sector enterprises (CPSE), Specified Undertaking of the Unit Trust of India (SUUTI), and state-run banks that are listed on the BSE and disinvested by the government. It covers all six BSE sectors which the CPSE, SUUTI and state-run banks represent collectively.

“The index is diversified and it contains six sectors. The risk of particular sector having extremely high weight, is mitigated with the caps on each sector,” said Mahavir Kaswa, senior manager, product management at Asia Index.

Kaswa pointed that for the last one year the index has risen around 20%, outperforming S&P BSE Sensex which has logged 17.4% gains in the same period. He added that the combined weight of CPSEs in the Bharat-22 index is almost 50%, that of SUUTI companies is around 40% and public sector banks is around 10%.

ALSO READ: Govt forms Bharat 22 ETF to sell stakes in 22 firms

“The index is also liquid as large cap stocks carry nearly 90% of index weightage and 20 out of 22 constituents representing 99% of index weight have derivative contracts,” said Kaswa.

This index has been licensed to ICICI Prudential Asset Management Co. for the development of an exchange traded fund (ETF).

“In this case, since it’s a government project which has been assigned to ICICI Prudential AMC, they will be structuring the product and issuing the ETF in the market,” said Koel Ghosh, business head, South Asia, S&P Dow Jones Indices.

“Since the government is involved, some bit of government intervention will be required,” said Ghosh when asked if other AMCs could license and use Bharat 22 index as the underlying index for their ETFs.

On 4 August, the government announced the launch of its second exchange traded fund (ETF), Bharat 22, which will comprise 22 stocks including those of CPSEs, public sector banks and its holdings under the SUUTI.

Finance minister Arun Jaitley said the ETF will have a diversified portfolio of companies from six sectors with a 20% cap on each sector and a 15% cap on each stock.

The index will be rebalanced annually in March, and individual stock and sector weight caps will be applied during such rebalancing.

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