BSE Quality Index

About BSE Quality Index

The S&P BSE Quality Index, similar to the NSE quality index, is a stock market index designed to track companies listed on the Bombay Stock Exchange (BSE) that are recognized for their strong quality characteristics. This index was launched by S&P Dow Jones Indices and BSE and comprises those kinds of companies that depict quality to the highest extent in terms of financial health and performance.

The index is constituted of firms having steady earnings, strong balance sheets, and return on equity. Underlying the qualitative traits, the index seeks to give investors an ideal benchmark for high-quality, stable stocks that should hold up better over time. Fundamentally, the S&P BSE Quality Index helps investors find companies with stronger financial fundamentals that may provide more stability and, therefore, lower risk compared to the broader market.

The premise of such design is the BSE index weightage given to reflect the performance of high-quality stocks in the BSE Large Midcap by their quality score. This score is calculated based on return on equity, accruals ratio, and financial leverage ratio. It was launched on 3rd December 2015. It can be used for a variety of purposes such as benchmarking fund portfolios, launching Index funds, ETF, and structured products, and also for research purposes.

How to Calculate S&P BSE Quality Index?

To calculate S&P BSE Quality Index, the following are the steps:

• The process starts by selecting companies based on their quality characteristics, such as high return on equity, low debt, and stable earnings. Each company’s quality score is derived from its financial performance metrics. 
• The index value is then calculated by weighting these companies based on their quality scores and market capitalization. 
• This means that companies with higher quality scores and larger market values have a greater impact on the index’s overall value. 

The index is updated regularly to reflect changes in company performance and market conditions.