BSE BANKEX

Indian banking is riding on a major recovery both in terms of strength and soundness. In the year 2002, return on assets in Indian banking was higher compared to many emerging economies and the Moody’s Bank Financial Strength Index (2002) placed India at 27.5, which is much better than 16.7 of Korea, 15.8 of Thailand and 12.5 of Japan. Similar to experience in other rapidly growing countries, India is making sizeable gains in expanding into consumer credit with tightening of credit administration procedures. Major policy actions that led to sharp fall in the interest rates enabled banks to post significant rise in operational profits. For instance trading profits of the public sector banks shot up by Rs. 3749 crores taking their net profits to an all time high of Rs. 8301 crores in FY 02. This year too banks are showing sizeable gains in their profitability. The enactment of Securitization Bill offered great opportunities to step up loan recoveries that could further enhance the scope of greater profitability.

These developments have impacted the performance of bank stocks significantly. Since bank stocks are emerging as a major segment in the equity markets, BSE considered it important to design an index exclusively for bank stocks. The index is computed on the basis of the globally accepted free float methodology. Earlier BSE had launched its first free float index on TMT stocks now popularly known as the BSE TECk Index.

Features

A few important features of the BANKEX are given below:

• BANKEX will track the performance of the leading banking sector stocks listed on the BSE

• BANKEX is based on the free float methodology of index construction

• The base date for BANKEX is 1^st January 2002.

• The base value for BANKEX is 1000 points

• BSE has calculated the historical index values of BANKEX since 1^st January 2002.

• 12 stocks which represent 90 percent of the total market capitalization of all banking sector stocks listed on BSE are included in the Index

• The Index will be disseminated on a real-time basis through BSE Online Trading (BOLT) terminals from 23^rd June, 2003

• Stocks forming part of the BANKEX along with the particulars of their free float adjusted market capitalization are listed below.

Performance of the BANKEX:

During the period between 1 Jan 2002 and 13 June 2003, the total market capitalization of BANKEX stocks has increased from 22970 cr. to 55283 cr. while the total market capitalization of BSE TECk index stocks has fallen from 105956 cr. to 80787 cr. and that of FMCG Index stocks from 87637 cr. to 75947 cr. During this period, BANKEX rose by 62 percent showing impressive gains among other major indices. The average daily volatility of BANKEX from its inception to date has been 1.38% as compared to 2.24% for BSE TECk and 1.06% for BSE FMCG Index for the same period.

BANKEX, is the new entrant in BSE’s current portfolio of 13 indices, and adds value to BSE’s ability in reflecting both the broad market and specific sector movements in the Indian Equity Markets.

History of replacements in BANKEX

Date Outgoing Scrips Replaced by 09.02-2004 ING Vysya Bank UTI Bank Ltd.     Kotak Mahindra Bank     UCO Bank     Indian Overseas Bank     Jammu & Kashmir Bank       31.01-2005   Vijaya Bank       06.06-2005 Corporation Bank Allahabad Bank Ltd.   Jammu & Kashmir Bank Ltd.     UCO Bank         28.11.2005   Centurion Bank Ltd.     Indusind Bank Ltd     Karnataka Bank Limited       03.07.2006 Indusind Bank Ltd Federal Bank Ltd.       08.01.2007 Karnataka Bank     Vijaya Bank         09.07.2007   Karnataka Bank Ltd.     Yes Bank Ltd.

Scrip selection criteria for BSE Bankex :

Eligible universe :
Scrips classified under banking sector that are present constituents of BSE-500 index would form the eligible universe.

Trading Frequency :
Scrips should have a minimum of 90% trading frequency in preceding six months.

Market Capitalisation :
Scrips with a minimum of 90% market capitalisation coverage in each sector based on free-float final rank will form the index.

Buffers :
A buffer of 2% both for inclusion and exclusion in the index is considered so that movements in and out of the index are minimized. Eg. A company can be included in the index only if it falls within 88% coverage and an existing index constituent cannot be excluded unless it falls above 92% coverage. However, the above buffer criterion is applied only after the minimum 90% market coverage is satisfied.
 

Source & Courtesy: Bseindia.com