About S&P BSE Consumer Durables Index
The S&P BSE Consumer Durables Index comprises companies of the BSE 500 index that manufacture or sell electronic domestic devices, which are expensive and usually have a long shelf life in average use, such as televisions, refrigerators, and washing machines.
The index would comprise about 10 stocks. However, the index size may get altered so that the aggregate free-float market capitalization does not go above 90 percent (+/-2 percent) of the complete market capitalization in the consumer durables sector. Presently, the index consists of 12 constituents.
As monitoring the share price of S&P BSE Consumer Durables suggests growing consumption, it also helps in forecasting an economic condition. A rising index suggests more disposable income and increasing consumer confidence to make purchases of durable goods.
How is BSE Consumer Durables Index Calculated?
The following criteria must be met before selecting a stock to include in the BSE Consumer Durables Index
- These stocks ought to be included in the BSE 500 index.
- The companies ought to be extremely liquid and transact on the BSE for above 90% of the sessions.
- At least INR 1 billion should be the average market worth of the companies.
The free-float market capitalization approach is used to rank the stocks after they have been chosen based on the criteria listed above. Only shares that are accessible for active trading on the stock exchange are taken into account for value under this method. The S&P BSE Consumer Durables share price is therefore determined by deducting restricted equities, such as ESOPs or government-owned shares.
The top stocks in the Consumer Durables sector, which represent over 90% of the sector's total market capitalization, are selected with a 2% variable to be included in this index. At present, the BSE Consumer Durables index consists of 12 components.
To find the S&P BSE Consumer Durables Share Price, add up all of the constituents' total free-float market capitalization using this formula:
BSE Consumer Durables Share Price = Total Free-Float Market Capitalization x Index Value for the Base Year / Market Capitalization for the Base Year
How to invest in BSE Consumer Durables?
The index itself is not an investment option. As a result, there are two ways to purchase the BSE Consumer Durables' components:
- Buying each of the 12 component stocks separately will depend on how much weight each has in the index.
- Invest in an index fund, and the fund will invest your money for you in the BSE Consumer Durables Index companies.
Is Investment in BSE Consumer Durables Safe?
Investing in the stock market involves market risk. However, the only thing that constitutes a market risk is a stock's price volatility. By diversifying your holdings, you can lower the market risk associated with your stock investments. The BSE Consumer Durables index is inherently diversified, consisting of firms that hold over 90% of the entire market capitalization of the consumer durables industry. Investing in BSE Consumer Durables stocks is hence less risky.
