About BSE Consumer Discretionary

Consumer discretionary goods are products considered non-essential, or luxury, items by consumers. Purchasing decisions for goods and services usually depend on disposable income. For instance, an air conditioner may be considered a luxury good by a low-income earner but a necessity for a high-income earner. BSE defines a company that operates in industries such as automobiles, textiles, leisure equipment, and durable goods as consumer discretionary. 

The S&P BSE Consumer Discretionary Goods and Services index provides exposure to constituents of the S&P BSE AllCap index that are categorized as consumer discretionary goods and services. The launch date of the index is April 15, 2015. It is real-time valued and calculated using the float-adjusted market capitalization calculation method. The float-adjusted market capitalization calculation method, adopted in 2003, excludes privately held shares from being used in the calculation and only considers shares available for trading on the stock exchange, as opposed to the previous full capitalization methodology. 

It is a group of 256 firms that are rebalanced once every year in September and reviewed quarterly in March, June, and December. Even though the index was introduced in 2015, its base date is September 16, 2005.

Criteria to Select Stocks for BSE Consumer Discretionary

The calculation of the index values previously utilized the full capitalization method. It counted all shares included in the market cap computation, whether the shares were privately held or exchange-traded. It became apparent that privately held shares have no effect on the stock's market price, and including all privately held shares in the computations was distorting the true performance representation of the index. This is what prompted the introduction of the float-adjusted capitalization computation method in 2003.

Calculating Float-Adjusted Market Capitalisation

The float-adjusted market capitalization methodology considers only outstanding freely tradable shares when computing the index value. Privately held, or closely held, shares are ignored because they would not impact the actual trading price on the BSE CDGS index and may give a misleading picture of the true performance of that particular index. 

Formula of Index Calculation: 

BSE CDGS Index =Total Free-float Market Capitalization×100/ Base Market Capitalization