BSE-Dow JV Asia Index launches 4 indices on non-market factors

Leading index provider Asia Index, a BSE and S&P Dow Jones Indices joint venture, on Monday launched four indices to measure non-market factors, like momentum, volatility, value and quality of stocks. 

The indices -- S&P BSE Enhanced Value Index, S&P BSE Low Volatility Index, S&P BSE Momentum Index and S&P BSE Quality Index -- include top 30 companies each and fall under the umbrella of S&P BSE factor indices.

The constituents are selected from S&P BSE LargeMidCap Index, a size sub-index of the S&P BSE AllCap family. "Somebody who wants a little bit more than the traditional market return based on factors this is one such option that will give exposure to the factors and gives you that additional risk adjusted return," Asia Index director business development Koel Ghosh told reporters here.

Individually, the enhanced value index is designed to measure the performance of companies with valuations based on ratios -- book value to price, earnings to price and sales to price. The low volatility index would track companies with the least amount of volatility. The volatility of the stocks is calculated over the last one year period.

On the other hand, the momentum index is designed to measure the performance of companies that exhibit persistence in their relative performance. Momentum is determined as risk adjusted price performance over the last one year (excluding the most recent month). Besides, the quality index tracks high quality stocks based on return on equity, accruals ratio, and financial leverage ratio.

The maximum weight of stocks in all four indices is capped at 5 per cent. The index composition would be reviewed semi-annually in March and September every year. Each index value is calculated on an end-of-the-day basis, in both rupee and the US dollar.