• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Our Bureau

Mumbai , July 18

MOVING in line with international trends, the Bombay Stock Exchange (BSE) on Friday announced that its benchmark 30-share Sensitive Index (Sensex) will be calculated based on the free-float methodology from September 1, 2003. Currently, the Sensex is calculated based on the full-market capitalisation methodology.

Under the free-float method, only the market capitalisation of shares that can be traded in the stock market is taken instead of taking total market capitalisation for calculating the weightage of individual companies in the index.

If the free-float factor of say 0.9 is assigned to a company in Sensex, it means that only 90 per cent of the total market capitalisation of that company would be taken into consideration for index calculation.

Globally, all major index providers such as MSCI, FTSE and S&P have adopted the same method. The MSCI India Standard Index is also based on the free-float methodology.

In India, BSE launched the first free-float-based index — BSE TECk — in July 2001 and BANKEX in June 2003.

In a statement, BSE said the shifting of Sensex to this methodology is a culmination of successful experiences with these two indices and a series of debates and discussions in the last few years.

The new methodology would align the Sensex with the best global practice in index construction. "A smooth transition from full-market capitalisation to free-float market capitalisation methodology would ensure that the basic characteristics of the Sensex are retained. Importantly, the free-float methodology will further improve the benchmarking qualities of Sensex while maintaining its historical continuity," it said.

BSE also stated that there would be no change in the Sensex value due to the change in the methodology. "The Sensex will continue to reflect the market in the same fashion, as it has been doing currently," the statement added.

Officials at the exchange said there would be some minor changes in the weightage of individual companies, but there would not be any major change in the weightage of companies.

Article E-Mail :: Comment :: Syndication

Stories in this Section
SEBI urges MFs to expand investor base

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line