BSE Financial Services

About BSE Financial Services Index

The Bombay Stock Exchange (BSE) has a sectoral index called the BSE Finance Index that measures the performance of the Indian economy's finance sector. The S&P BSE AllCap index's finance sector is represented by this real-time index, which comprises 127 stocks. Banks, insurance, and other financial services are the fundamental industries that qualify for inclusion in the BSE Finance index. 

History of BSE Finance Index

Launched on February 25, 2022, the BSE Financial Services index had a base value of 1000 and its first value date was September 18, 2020. Since its launch, the S&P BSE Finance share price has surpassed 7,500 at around 18.69x P/E multiples. With index stocks capped at 33%, the index value is determined using a free-float capped market capitalization value. 

Management of BSE Finance Index

Asia Index Private Ltd., a joint venture between S&P and BSE Ltd., is the organization that oversees and manages the S&P BSE Finance index. INR and US$ are the two currencies used to compute the BSE Finance index; spot foreign exchange rates for US$ are derived from data provided by Refinitiv. 

How are Stocks Selected for Inclusion in BSE Finance Index?

For the securities to be included in the BSE Finance index, they must meet the following eligibility requirements: 

1. The stock ought to be listed on the Bombay Stock Exchange and have its headquarters in India.
2. It ought to be included in the S&P BSE AllCap index.
3. Stock should belong to the BSE Sector Classification System's Finance sector.
4. It should comprise each of the company's qualifying share classes.
5. Stock should have had an impact cost during the previous six months of no more than 0.5%.
6. It must have a listing history spanning more than six months and a trading frequency greater than 80%.
7. Stock should have a turnover rate of at least 5%.
8. To be considered for inclusion, companies that have launched initial public offerings (IPOs) must have a minimum of one month of listing history.
9. Companies with a minimum of one month of listing history are eligible for inclusion if they have completed a plan of arrangement, such as spin-offs, capital restructuring, etc.
10. Businesses that undergo mergers, delistings, takeovers, suspensions, objections to surveillance, bankruptcies, or graded surveillance measures (GRM) may be omitted from consideration between the rebalancing dates.
11. If, by the last trading day of January, an index stock's average daily total market capitalization is less than INR 0.5 billion, it should be excluded.

How is BSE Finance Index Calculated?

The BSE Financial Services share price is calculated as follows:

Index value = Index Market Value / Divisor

Where,

Index Market Value = Price * Shares * IWF (Float Factor) *Fx rate * AWFi

AWFi = Adjusted Stock Market Value factor assigned on rebalancing date

Divisor = Index Market Value after rebalancing / Index Value before rebalancing

Every year in September, the BSE Finance index is reconfigured. The index cap weightings are reviewed quarterly in December, March, and June. The maximum weight for a single stock is 33%, while the maximum weight for the top three components is 63%. Regardless of whether the stock rankings are determined by their free-float market capitalization or final weights, they must be consistent for every index component.

How to Invest in BSE Finance Index?

Investing directly in BSE Finance is not possible. Using a Demat account, you can invest in individual equities in a comparable index-weighted ratio. If not, you could buy index funds that follow the BSE Finance index passively. Exposure, however, needs to be limited to portfolio diversity.