With newer index funds and ETFs emerging, the passive funds India space is hotting up. Analysts say that passive funds India like ETFs save research time on analysing the performance of a sector or segment. With the aim
Asia Index Private Ltd., a fully owned subsidiary of Bombay Stock Exchange (BSE) has officially launched three new indices – BSE SENSEX Sixty 65:35, BSE SENSEX Sixty and BSE Power and Energy Index. They were launched on October 04, 2024. These indices can serve multiple important functions in the investment landscape. They can be utilised for benchmarking Portfolio Management Services (PMS), mutual fund schemes and fund portfolios. They are also suitable for implementing passive investment India strategies like ETFs and Index Funds as well as for assessing the performance of individual companies.
Investors of passive funds India, now, have access to a wider range of market opportunities, enhancing their investment strategies with BSE’s latest additions to its index suite.
Details of 3 Indices
| Index Name | BSE SENSEX Sixty 65:35 | The BSE SENSEX Sixty | BSE Power and Energy |
|---|---|---|---|
| Type of Index | It is a strategy index comprising the constituents of BSE SENSEX and BSE SENSEX Next 30 in the ratio of 65:35 respectively. | It is a broad market index comprising the constituents of BSE SENSEX and BSE SENSEX Next 30 based on free-float market capitalisation. | It is a thematic index that measures the performance of companies that are present in BSE 500 and belongs to the Energy and Utilities sectors. |
| First value Date | June 23, 2014 | December 31, 2013 | |
| Base Value | 10,000 | 1,000 | |
| Number of constituents | 60 | 30 | |
| Reconstitution Frequency | Semi-annually in June and December | Semi-annually in June and December | |
| Weighting method | Capped Float-adjusted market cap weighted | Float-adjusted market cap weighted | Capped Float-adjusted market cap weighted (Capping -15%) |
| Index Universe | Both these indices are derived from the constituents of the BSE 100 that are members of the BSE SENSEX and BSE SENSEX Next 30. | The Index is derived from the constituents of BSE 500 Index that are classified under the Macro-Economic Indicator as Energy (all constituents under this group) and Utilities (constituents sub categorised as Power under the Industry level) are eligible for the index. | |
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Sectoral Composition
| Sectors | Constituency (%) |
|---|---|
| Computers - Software & Consulting | 10% |
| Private Sector Bank | 8% |
| Pharmaceuticals | 7% |
| 2/3 Wheelers | 5% |
| Non-Banking Financial Company (NBFC) | 5% |
| Passenger Cars & Utility Vehicles | 5% |
| Refineries & Marketing | 5% |
| Aerospace & Defence | 3% |
| Cement & Cement Products | 3% |
| Diversified FMCG | 3% |
| Financial Institution | 3% |
| Iron & Steel | 3% |
| Life Insurance | 3% |
| Packaged Foods | 3% |
| Public Sector Bank | 3% |
| Others (17 sectors having 2% each share including Commodities, Hospitals, Power and Oil, Telecom, Retail etc.) | 28% |
| Sectors | Constituency % |
|---|---|
| Power Generation | 20% |
| Refineries & Marketing | 20% |
| LPG/CNG/PNG/LNG Supplier | 17% |
| Integrated Power Utilities | 13% |
| Gas Transmission/Marketing | 7% |
| Oil Exploration & Production | 7% |
| Coal | 3% |
| Lubricants | 3% |
| Power - Transmission | 3% |
| Power Distribution | 3% |
| Trading - Gas | 3% |
The BSE SENSEX Sixty and BSE SENSEX Sixty 65:35 both consist of the same set of 60 companies, reflecting their composition. However, their intended uses and strategies cater to different investor preferences, allowing for greater flexibility in portfolio management and investment planning.
Comparative Analysis
1. Sector Focus
The BSE SENSEX Sixty is more diversified across multiple sectors, with a notable emphasis on technology, finance and healthcare. This broad approach can provide resilience against sector-specific volatility. In contrast, the BSE Power and Energy Index is heavily focused on the energy sector, reflecting the growing demand for energy in India and the transition towards a more sustainable energy mix.
2. Growth Potential
The technology and financial sectors in the BSE SENSEX Sixty have strong growth potential driven by digitalization and financial inclusion, appealing to investors looking for high-growth opportunities. The BSE Power and Energy Index, while focused on a critical sector, may be influenced by regulatory changes, shifts towards renewable energy and global energy trends.
3. Investment Strategies
Investors seeking diversification might prefer the BSE SENSEX Sixty as it offers exposure to various sectors and less risk associated with reliance on a single industry. Those interested in thematic investing might gravitate towards the BSE Power and Energy Index, particularly as global trends shift towards sustainable energy solutions.
How do They Open up The Possibility of Newer ETFs in The Categories?
The introduction of these new indices not only diversifies the available investment options but also enhances the potential for innovative passive funds India like ETFs. Investors can choose from broad market exposure, balanced strategies, or targeted thematic investments, aligning their portfolios with specific goals and preferences. This fosters greater market participation and opens up avenues for both retail and institutional investors to tailor their strategies effectively. The launch of new indices creates exciting opportunities for the development of innovative passive investment India strategies like ETFs in several ways, each catering to different investment strategies and investor preferences:
1. BSE SENSEX 60 (Broad Market Exposure)
(a) Composition: Its broad coverage allows for a comprehensive reflection of the Indian stock market.
(b) ETF Opportunities: An ETF tracking the BSE SENSEX 60 can provide investors with a diversified portfolio that encompasses both established and emerging market leaders. This is particularly attractive for those looking to gain exposure to the broader Indian economy without having to pick individual stocks.
(c) Target Audience: Retail investors seeking passive investment strategies can use such ETFs to participate in market growth, while institutional investors may find them useful for asset allocation.
2. BSE SENSEX Sixty 65:35 (Balanced Investment Strategy)
(a) Composition and Strategy: This index, constructed with a strategic allocation of 65% to equities (from the SENSEX) and 35% to stocks from the SENSEX Next 30, provides a balance between growth and stability. This approach can help mitigate risks associated with volatility in the stock market.
(b) ETF Development: ETFs based on this index can cater to conservative investors looking for exposure to equities while maintaining a buffer through fixed income or other assets. This can attract risk-averse investors who want growth potential without excessive risk.
(c) Performance and Risk Management: Such ETFs can appeal to both individual and institutional investors who prioritize risk management in their portfolios, making them a valuable addition to diversified investment strategies.
3. BSE Power and Energy Index (Thematic Investment Opportunities)
(a) Specialised ETFs: Passive funds India like ETFs based on this index can target investors interested in specific themes, such as sustainability, clean energy, or infrastructure development. This thematic focus can help investors capitalize on trends like the transition to renewable energy and the increasing importance of energy efficiency.
(b) Attracting Different Investor Profiles: Institutional investors, as well as socially responsible investors, may be drawn to these passive investment India strategies like ETFs as they align with current trends in environmental sustainability and corporate responsibility. Additionally, retail investors looking to invest in growing sectors may find these products appealing.
Wrapping Up
Overall, the new indices not only enrich the investment offerings in India but also empower investors with the tools to align their portfolios with their individual investment goals and risk profiles.
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