S&P BSE India Infrastructure Methodology

Transcription

1 S&P BSE India Infrastructure Methodology May 2014 S&P Dow Jones Indices: Index Methodology

2 Table of Contents Introduction 3 Partnership 3 Highlights 3 Index Family 3 Eligibility Criteria and Index Construction 4 Index Eligibility 4 Index Construction 4 Constituent Weights 5 Index Calculations 5 Index Maintenance 6 Rebalancing 6 Ongoing Maintenance 6 Additions 6 Deletions 6 Weight Capping 6 Corporate Actions 7 Currency of Calculation 7 Exchange Rate 7 Base Date and History Availability 8 Float Adjustment 8 Index Data 9 Total Return Index 9 Index Governance 10 Index Committee 10 S&P Dow Jones Indices: S&P BSE India Infrastructure Methodology 1

3 Index Policy 11 Announcements 11 Pro-forma Files 11 Holiday Schedule 11 Unscheduled Market Closures 11 Recalculation Policy 12 Index Dissemination 13 Tickers 13 FTP and Web site 13 Appendix 14 Determining Float Factors of Companies (IWF Investible Weight Factors) 14 Float Bands 14 S&P Dow Jones Indices Contact Information 15 Index Management 15 Product Management 15 Media Relations 15 Client Services 15 Disclaimer 16 S&P Dow Jones Indices: S&P BSE India Infrastructure Methodology 2

4 Introduction Partnership On February 19, 2013, S&P Dow Jones Indices and the BSE Ltd. (formerly Bombay Stock Exchange ( BSE ) announced their strategic partnership to calculate, disseminate, and license the widely followed BSE suite of indices. Highlights The S&P BSE India Infrastructure Index is designed to measure the performance of the top 30 Indian infrastructure companies that meet benchmarking and investability requirements, with the goal of providing liquid and tradable exposure to this sector comprising of five infrastructure clusters: Energy Telecommunications Transportation Utilities Non-Banking Financial Companies (NBFCs) 1 Clusters are formed from a combination of GICS sub-industries, as detailed in Eligibility Criteria and Index Construction. The S&P BSE India Infrastructure has a targeted constituent count of 30 stocks and follows a modified market capitalization weighted scheme to ensure diversified exposure. Weighting criteria are applied to the index at each rebalancing. This methodology was created by S&P Dow Jones Indices to achieve the aforementioned objective of measuring the underlying interest of each index governed by this methodology document. Any changes to or deviations from this methodology are made in the sole judgment and discretion of S&P Dow Jones Indices so that the index continues to achieve its objective. Index Family The S&P BSE India Infrastructure is part of the thematic family of the S&P BSE group of indices. For information on the other S&P BSE thematic indices, please refer to the S&P BSE Indices Methodology document located on our Web site at 1 Includes only those companies categorized by the Reserve Bank of India (RBI) as an Infrastructure Finance Company or derive major business revenue from Infrastructure Finance. S&P Dow Jones Indices: S&P BSE India Infrastructure Methodology 3

5 Eligibility Criteria and Index Construction Index Eligibility The universe for the S&P BSE India Infrastructure is drawn from the constituents of the S&P BSE 500. For more information on the S&P BSE 500, please refer to the S&P BSE Indices Methodology document. Index Construction The index is constructed as follows: 1. The constituent stocks of the S&P BSE 500 are mapped to an infrastructure cluster according to the table below. Stocks that do not fall within one of the five infrastructure clusters below are excluded. GICS Code Description Infrastructure Cluster Oil & Gas Drilling Oil & Gas Equipment & Services Energy Oil & Gas Storage & Transportation Airlines Airport Services Highways & Railtracks Transportation Marine Ports & Services Other Diversified Financial Services Specialized Finance 2 NBFCs Integrated Telecommunication Services Wireless Telecommunication Services Telecommunications Electric Utilities Gas Utilities Multi-Utilities Water Utilities Utilities Independent Power Producers & Energy Traders Renewable Electricity For more information on GICS, please refer to the Global Industry Classification Standard (GICS) Methodology document. 2 Includes only those companies which are classified in the Infrastructure Finance Company category of NBFC s by RBI or derive major business revenue from Infrastructure Finance. 3 Excludes Gas & Power Marketing & Trading Specialists and/or Integrated Energy Merchants. S&P Dow Jones Indices: S&P BSE India Infrastructure Methodology 4

6 2. From the remaining eligible stocks, stocks with an average three month daily value traded of less than INR 10 million are excluded. 3. From the remaining eligible stocks, the top 30 stocks by float-adjusted market capitalization, subject to a maximum of 10 stocks per infrastructure cluster, form the index. 4. In cases where the number of constituents falls short of the target count, the top non-constituent eligible stocks by float-adjusted market capitalization after step 2 are added to the index to achieve a constituent count of If the constituent count still falls short of 30, the top non-constituent eligible stocks by float-adjusted market capitalization after step 1 are added to the index to achieve a constituent count of 30. Note: When steps 4 and 5 are applied, an infrastructure cluster may exceed the 10 stock limit described in step 3. Constituent Weights The weight of each infrastructure cluster is capped at 30% and each individual stock is capped at 10%. Weight caps are applied at each semi-annual rebalancing. Index Calculations The S&P BSE India Infrastructure employs a modified market capitalization weighting scheme. The index is calculated by means of the divisor methodology used in all S&P Dow Jones Indices equity indices. For more information on the index calculation methodology, please refer to the Modified Market Capitalization Weighted Indices section of S&P Dow Jones Indices Index Mathematics Methodology document. S&P Dow Jones Indices: S&P BSE India Infrastructure Methodology 5

7 Index Maintenance Rebalancing Frequency. Index rebalancing follows that of the S&P BSE 500 and is detailed in the table below. Note: The Effective and Reference dates are after the market close. Index Frequency Effective Date 4 Reference Date 4 S&P BSE India Infrastructure Ongoing Maintenance Semi-annual 3rd Friday of Jun & Dec Last Trading Day of Apr & Oct The index is reviewed on an ongoing basis to account for corporate events such as mergers, takeovers, delistings or bankruptcies. Changes to index composition and related weight adjustments are made as soon as they are effective. These changes are typically announced two business days prior to the implementation date. Additions No companies are added to the index between semi-annual rebalancings. As such, the number of stocks in the index may fall below the targeted constituent count of 30 due to any deletions made between rebalancings. Deletions Between semi-annual rebalancings, a company can be deleted from the index due to corporate events such as mergers, acquisitions, takeovers, delistings or bankruptcies. Whenever possible, changes in the index s components are announced at least two business days prior to their implementation date. Whenever practicable, S&P Dow Jones Indices uses the closing price for all deletions. Weight Capping The weight of each infrastructure cluster is capped at 30% and each individual stock is capped at 10%. Weight caps are applied at each semi-annual rebalancing. 4 Index history prior to June 2014 was computed using the last trading day of March and September as reference and effective dates for semi-annual rebalancings. S&P Dow Jones Indices: S&P BSE India Infrastructure Methodology 6

8 Corporate Actions Corporate Action Spin-off Rights Offering Stock Dividend (Bonus), Stock Split, Reverse Stock Split Change in shares (new issue, repurchase, warrant conversion etc.) Special Dividend Adjustment Made to Index In general, parent and spun off company will be dropped from the index. The price is adjusted to the Price of the Parent Company minus the Price of the Rights Offering/Rights Ratio. Index Shares change so that the company s weight remains the same as its weight before the rights offering. Index shares are multiplied by and price is divided by the split factor. None. Price of stock making special dividend is reduced by the per share special dividend amount after the close of trading on the day before the dividend ex-date. Divisor Adjustment? Yes Constituent Change No intraday rebalancing. No Deletions due to delisting, acquisition or any other corporate event resulting in the deletion of the stock from the Index will cause the weights of the rest of the stocks in the index to change. Yes Constituents changing their GICS classification to a non-eligible GICS will be removed at the next rebalancing. Rebalancing changes including additions, deletions and weight changes. For more information, please refer to S&P Dow Jones Indices Equity Indices Policies & Practices document located under the Resource Center on our Web site, Currency of Calculation The index is calculated in Indian rupees and U.S. dollars. Exchange Rate Spot foreign exchange rates, as supplied by an established market information vendor, are used in the end-of-day calculation of the U.S. dollar version of the index 5. No No No Yes No Yes 5 WM/Reuters foreign exchange rates were used in calculating index history prior to April 23, S&P Dow Jones Indices: S&P BSE India Infrastructure Methodology 7

9 Base Date and History Availability Index history availability, base date and base value are shown in the table below. Index Name Launch Date First Value Date Base Date Base Value S&P BSE India Infrastructure 19-May Apr Apr Float Adjustment For detailed information on float adjustment, please refer to the Appendix of this document. S&P Dow Jones Indices: S&P BSE India Infrastructure Methodology 8

10 Index Data Total Return Index Total return index is calculated for the S&P BSE India Infrastructure, as well as the price return index. Ordinary cash dividends are applied on the ex-date in calculating the total return index. Special dividends are dividends greater than 5% of the close price one day prior to the dividend ex-date. Whether a dividend is funded from operating earnings or from other sources of cash does not affect the determination of whether it is ordinary or special. Special dividends are treated as corporate actions with offsetting price and divisor adjustments; the total return index reflects both ordinary and special dividends. Total return index reflects the return to an investor where gross dividends are reinvested. Please refer to S&P Dow Jones Indices Index Mathematics Methodology for more detail on total and net return index calculations. S&P Dow Jones Indices: S&P BSE India Infrastructure Methodology 9

11 Index Governance Index Committee The S&P BSE India Infrastructure is maintained by the S&P BSE Index Committee. The Index Committee meets regularly. At each meeting, the Index Committee reviews pending corporate actions that may affect index constituents, statistics comparing the composition of the index to the market, companies that are being considered as candidates for addition to the index, and any significant market events. In addition, the Index Committee may revise index policy covering rules for selecting companies, treatment of dividends, share counts or other matters. S&P Dow Jones Indices considers information about changes to its indices and related matters to be potentially market moving and material. Therefore, all Index Committee discussions are confidential. For information on Quality Assurance and Internal Reviews of Methodology, please refer to S&P Dow Jones Indices Equity Indices Policies & Practices document located under the Resource Center on our Web site, S&P Dow Jones Indices: S&P BSE India Infrastructure Methodology 10

12 Index Policy Announcements All index constituents are evaluated daily for data needed to calculate index levels and returns. All events affecting the daily index calculation are typically announced 30 days in advance via the Index Corporate Events report (.SDE), delivered daily via ftp to all clients. Any unusual treatment of a corporate action or short notice of an event may be communicated via to clients. Index methodology is constantly under review for best practices, and any changes are announced well ahead of time via the Web site and to all clients. Pro-forma Files In addition to the corporate events file (.SDE), S&P Dow Jones Indices provides constituent proforma files each time the index rebalances. The proforma file is typically provided daily five business days in advance of the rebalancing date and contains all constituents and their corresponding weights and index shares effective for the upcoming rebalancing. Since index shares are assigned based on prices one week prior to the rebalancing, the actual weight of each stock at the rebalancing differs from these weights due to market movements. Please visit the S&P Dow Jones Indices Resource Center for a complete schedule of rebalancing timelines and proforma delivery times at Holiday Schedule The S&P BSE India Infrastructure is calculated on all business days when the BSE is open. A complete holiday schedule for the year is available on the BSE Ltd. Web site at Unscheduled Market Closures In situations where the exchange is forced to close early due to unforeseen events, such as computer or electric power failures, weather conditions or other events, S&P Dow Jones Indices calculates the closing price of the index based on (1) the closing prices published by the exchange, or (2) if no closing price is available, the last regular trade reported for each security before the exchange closed. If the exchange fails to open due to unforeseen circumstances, S&P Dow Jones Indices treats this closure as a standard market holiday. The index uses the prior day s closing prices and shifts any corporate actions to the S&P Dow Jones Indices: S&P BSE India Infrastructure Methodology 11

13 following business day. If all exchanges fail to open or in other extreme circumstances, S&P Dow Jones Indices may determine not to publish the index for that day. For further information on Unexpected Exchange Closures, please refer to S&P Dow Jones Indices Equity Indices Policies & Practices document located under the Resource Center on our Web site, Recalculation Policy S&P Dow Jones Indices reserves the right to recalculate an index under certain limited circumstances. S&P Dow Jones Indices may choose to recalculate and republish an index if it is found to be incorrect or inconsistent within two trading days of the publication of the index level in question for one of the following reasons: 1. Incorrect or revised closing price 2. Missed corporate event 3. Late announcement of a corporate event 4. Incorrect application of corporate action or index methodology Any other restatement or recalculation of an index is only done under extraordinary circumstances to reduce or avoid possible market impact or disruption as solely determined by the Index Committee. For more information on the recalculation policy please refer to S&P Dow Jones Indices Equity Indices Policies & Practices Index Methodology document located under the Resource Center on our Web site, For information on Calculations and Pricing Disruptions, Expert Judgment and Data Hierarchy, please refer to S&P Dow Jones Indices Equity Indices Policies & Practices document located under the Resource Center on our Web site, S&P Dow Jones Indices: S&P BSE India Infrastructure Methodology 12

14 Index Dissemination Index levels are available through S&P Dow Jones Indices Web site at major quote vendors (see codes below), numerous investment-oriented Web sites, and various print and electronic media. Tickers Bloomberg Index Return Type INR USD S&P BSE India Infrastructure Price Return SPBSINIP SPBSINUP Total Return SPBSINIT SPBSINUT FTP and Web site Daily stock level and index data is available via FTP on subscription. For further information, please refer to S&P Dow Jones Indices Web site at S&P Dow Jones Indices: S&P BSE India Infrastructure Methodology 13

15 Appendix Determining Float Factors of Companies (IWF Investible Weight Factors) BSE determines the float factor for each company based on the detailed shareholding pattern submitted by the companies in the prescribed format. The float factor is a multiple with which the total market capitalization of a company is adjusted to arrive at the float market capitalization. Once the float of a company is determined, it is rounded-off to the higher multiple of 5 and each company is categorized into one of the 20 bands given below. Float factor of 0.55 means that only 55% of the market capitalization of the company will be considered for index calculation. Float Bands % Float Float Factor % Float Float Factor >0-5% 0.05 >50-55% 0.55 >5-10% 0.10 >55-60% 0.60 >10-15% 0.15 >60-65% 0.65 >15-20% 0.20 >65-70% 0.70 >20-25% 0.25 >70-75% 0.75 >25-30% 0.30 >75-80% 0.80 >30-35% 0.35 >80-85% 0.85 >35-40% 0.40 >85-90% 0.90 >40-45% 0.45 >90-95% 0.95 >45-50% 0.50 >95-100% 1.00 S&P Dow Jones Indices: S&P BSE India Infrastructure Methodology 14

16 S&P Dow Jones Indices Contact Information Index Management David M. Blitzer, Ph.D. Managing Director & Chairman of the Index Committee Khushro Bulsara Head of Listing Compliance & Legal Jitendra Gulabani Index Manager Product Management Arunkumar Dolas Mahavir Kaswa Media Relations David Guarino Communications Client Services Beijing Dubai Hong Kong London New York or Sydney Tokyo S&P Dow Jones Indices: S&P BSE India Infrastructure Methodology 15

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