BSE Momentum Index

S&P BSE Momentum Index Fund

The 30 businesses in the BSE LargeMidCap that show the most persistence in their relative performance, as determined by their risk-adjusted price momentum score, are the focus of the BSE Momentum Index. It was introduced on December 3rd, 2015. It can be used for several things, including research, index funds, exchange-traded funds, and structured product launches, as well as benchmarking fund portfolios. 

Constituent Selection

Businesses that meet the eligibility requirements are arranged according to their momentum scores. The top 24 businesses are chosen for index inclusion, regardless of whether they are currently constituents or not. Until the desired constituent count of 30 is reached, existing constituents ranked 25–36 are chosen in order of highest rank. Non-constituents are chosen in order of highest rank until the goal component count is met if, following this step, the target constituent count is not reached.

Constituent Weightings of the BSE Momentum Index

The S&P BSE Momentum Index Fund uses the divisor approach seen in the stock indices of Asia Index Pvt. Ltd. and has a non-market capitalization weighting scheme. Subject to a maximum weight limit, each firm is weighted by the product of its momentum score and its float-adjusted market capitalization weight in the eligible index universe. This is accomplished through the use of an optimization process that, subject to the following restrictions, determines the final weights by minimizing the total of the squared differences between the capped and uncapped weights, divided by the uncapped weight for each stock. 

Each security's maximum weight in the BSE Momentum Index is equal to the lesser of 5% and three times its market capitalization weight adjusted for float. It should be noted that the capping algorithm reduces tracking error by redistributing the extra weight to the other stocks by their momentum weights. If the optimization process is unsuccessful for a predetermined amount of time, the limits are loosened to include the security's maximum weight and three times its market capitalization weight in the index that has been adjusted for float. Every six months, there is a semi-annual rebalance of the BSE Momentum Index.