The Technology orientation of the current economy has primarily marked a
paradigm shift from manufacturing based activities to knowledge based
activities. In the present economic scenario, tangible assets like land, plant &
machinery are losing their significance to intangibles like intellectual
property, knowledge base and technology. This has resulted in the dominance of
emerging sectors like Information Technology, Media, & Telecom.
The bull run in the technology stocks in the last couple of years followed by
the recent crash in valuations of technology (tech) stocks globally have kept
investors equally fascinated. It is without doubt that the world is closely
tracking the performance of the TMT sectors to infer future trends in the
economy.
Going by the trading pattern, around 68% of the turnover on the stock exchanges
is taking place in TMT sector stocks. These stocks collectively account for 23%
of the total market capitalisation. The investment interest in technology stocks
continues unabated.
Scrip selection criteria for BSE TECkIndex :
Eligible universe :
Scrips classified under information technology, media and telecom sectors 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.
WHY BSE-TECk INDEX?
The TMT sectors have seen heightened activity in the last couple of years and
the stock valuations of the companies in these sectors have witnessed
unprecedented volatility. This led to a strong bull run in the TMT stocks in
1999 and early 2000. The market subsequently witnessed the most unexpected
sell-off in the stocks of the TMT sectors which led to a huge market
capitalisation erosion on the bourses and scared away genuine investors. It is
felt that in the absence of a proper benchmark, the performance of the TMT
sectors remained inadequately tracked. In order to fill this void, the BSE-TECk
index is being positioned as a reliable index for benchmarking the performance
of the TMT sectors.
The launch of BSE-TECk index can be justified on rational grounds which
include inter-alia:
-
Globally a lot of investment is being committed to the TMT sectors. Even in India, the last 2 years have seen a lot of international and local money flowing into the TMT sectors.
-
The TMT sectors are currently dominating the trading pattern on the bourses worldwide. In India, the TMT sectors account for around 68% of the total daily turnover.
-
With a lot of domestic retail money committed to the TMT sectors and existence of many mutual funds dedicated to one or more of the TMT sectors in India, a need for a quality benchmark to track the performance of such funds has been long felt.
-
The global and domestic investment community monitors eagerly the performance of the TMT sectors to discern typical trends in the economy.
-
To provide a ready basket of quality TMT stocks for passive investors.
-
Reference for Index futures, options and other derivative products in times to come
| History of replacements in BSE-TECk Index |
|
| 1. | What is the BSE TECk Index? |
| Ans | The BSE-TECk is a stock index constituted of companies in the Information Technology, Media and Telecom sectors. It would track the performance of TMT sectors through a basket of 21 quality stocks. The BSE TECk Index would provide a quality benchmark for the investment community in the knowledge-based sectors. |
| 2. | What is the need for launching BSE-TECk Index? |
| Ans | The BSE TECk
Index is being launched in view of the following developments in the
domestic and international capital markets:
|
| 3. | What does 'TECk' stand for? |
| Ans | 'TECk'
stands for the following: 'T' - Technology (BSE Sector: Information Technology) 'E' - Entertainment(BSE Sector: Media & Publishing) 'C' - Communication (BSE Sector:Telecom) 'k' - Other Knowledge based companies not falling in any of the above 3 sectors. |
| 4. | What is the number of constituents in the BSE-TECk Index? |
| Ans | . There are 21 constituents in the BSE-TECk Index |
| 5. | What is the Base Date for BSE-TECk Index? |
| Ans | The Base Date for BSE TECk Index is 2nd April, 2001 |
| 6. | What is the Base Value for BSE-TECk Index? |
| Ans | The Base Value for BSE TECk Index is 1000 points. In other words, the BSE TECk Index was equal to 1000 on 2nd April 2001. |
All About Sensex, Launch of BSE Sensex
What is Sensex in the stock market?
What
are the objectives of SENSEX?
How to
calculate BSE SENSEX?
What is the beta of SENSEX scrips?
SENSEX - Scrip selection criteria
Maintenance of SENSEX
How is the closing Index calculated?
What are the criteria for selection and review of scrips for the SENSEX?
Who selects these 30 stocks & How do they select these 30 stocks?
Dollex series of BSE indices
Book Building - About Book Building
Definition of Free-float & Determining Free-float factors of companies
Understanding Free-float Methodology & Its Major advantages
Book Building - Glossary