BSE Information Technology

About S&P BSE Information Technology

The BSE calculates numerous indices in India, such as the BSE Sensex, BSE 100, and so on, to evaluate the entire market activity. However, the components of these indexes are a collection of equities from many industries. Although these indexes give an overview of market developments, it is difficult to evaluate the impact of each sector individually. In April 2015, the BSE released 11 sectoral indices.

The BSE information technology index is another among these sectoral indices. India's emergence as an economic powerhouse in the twenty-first century has been fuelled by the growth of the information technology industry. Understanding the movement of IT stocks is critical given the Indian IT sector's widespread acceptance and the government's efforts to digitize its activities. 

The BSE Information Technology Index or BSE IT includes all stocks of firms that offer IT or related services. These stocks are chosen among the members of the BSE All Cap index. The S&P BSE IT index currently lists 62 components. These stocks are rated according to their free-float market capitalization.

While the free-float technique is used to rank the companies, the market capitalization of the BSE IT members is limited to determining the final value of the index. This indicates that there is a maximum weightage that a single stock or group of stocks can have in the index. The BSE IT index is rebalanced annually in September. However, the constituents' status is assessed quarterly in December, March, and June.

As technology advances, more and more firms rely on IT to fuel effective business processes. This expands the significance of the IT sector in economic growth, particularly in developing economies such as India. As a result, analysts can benefit from studying the movement of BSE IT to make conclusions about wider market trends. 

Criteria for Selecting BSE Information Technology Companies

To be eligible for inclusion on sectoral indexes, a stock must also be included in the BSE All Cap index. As a result, all companies in the IT or related services sector are selected and rated based on free-float market capitalization. 

To take things a step further, the BSE index does not use free-float market capitalization as its valuation technique. Rather, it limits the maximum weightage a stock can have on the index. Here are the regulations for limiting BSE IT components and how to rebalance them.

• A single company cannot have more than 33% weightage in the index.
• The combined weight of the top three corporations should not exceed 63%.
• When the following rules are violated, surplus weight is removed from the capped components and distributed among the uncapped constituents to rebalance the index.