| 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. |
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| 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:- 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.
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| 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. |
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| 4. | What is the number of constituents in the BSE-TECk Index? |
| Ans | . There are 21 constituents in the BSE-TECk Index |
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| 5. | What is the Base Date for BSE-TECk Index? |
| Ans | The Base Date for BSE TECk Index is 2nd April, 2001 |
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| 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. |
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| 7. | Which methodology is used for the calculation of the BSE-TECk Index? |
| Ans | Modified market capitalisation weighted method is used for calculating the BSE TECk Index. It is also called the free-float adjustment method because it takes into consideration only the free-float (non-promoter) capital of the company for the purpose of calculation of the index. It may be noted that currently all other stock market indices in India take into consideration the entire market capitalisation.
Free-float of a company consists of shares readily available in the market for trading. These are shares held by non-promoters of the company. The market capitalisation of a company is adjusted to reflect the free-float portion. For e.g. if a company has 35% non-promoter-holding, then only 35% of the total market capitalisation of the company would be considered for the purpose of calculating the index.
SEBI has mandated submission of shareholding pattern to the exchanges (on a quarterly basis) by all listed companies in a standardized format. |
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| 8. | How is free-float for a company determined? |
| Ans | Free-Float for a company is determined as per format relating to shareholding pattern stipulated by SEBI and incorporated in clause 35 of the Listing Agreement. The format is as follows:- Promoters:
Indian
Foreign
Persons acting in concert - Non-Promoters:
Institutions (FI/FII's)
Corporate Bodies:
Public
For the purpose of BSE TECk Index calculation, Part B i.e. 'Non-Promoters' is taken as Free-Float of the company
Example: Company XYZ:
- Promoters:
Indian: 30%
Foreign: 10%
Persons acting in concert: 15%
- Non-Promoters:
Institutions: 15%
Corporate Bodies: 0%
Public: 30%
Free-Float = B = 45% |
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| 9. | How is BSE-TECk index different from other BSE indices? |
| Ans | The BSE-TECk index is the first free-float adjusted index in the country. Globally most of the index providers have switched to free-float adjusted indices to better reflect the true buying and selling opportunity in the market. The free-float adjusted index ignores the locked portion of a company's equity and takes into consideration only the freely tradable portion for the purpose of calculating the index. All other BSE Indices presently consider the full equity of a company for the purpose of index calculation irrespective of whether the equity is held by promoters or non-promoters. |
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| 10. | How are stocks picked for the BSE-TECk index? |
| Ans | The BSE-TECk Index is constructed and maintained as per a laid down policy detailed in the "Guide to BSE-TECk Index". The Guide has laid down a scientific and comprehensive construction and revision methodology for the TECk Index in order to minimize subjectivity in index calculation and maintenance. |
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| 11. | How are weights of companies in the BSE-TECk index determined? |
| Ans | The constituent companies in the BSE-TECk index are weighted by their free-float adjusted market capitalisation.
For e.g. an Index of two constituent stocks A and B will have the following weightages in the Index given their market capitalisation and free-float factors as below:
| Company | Mkt Cap. (Rs. Crs.) | Free-Float Adj. Factor | Free-Float Adjusted Mkt. Cap. | Weightage (%) | | A | 10000 | 0.25 | 2500 | 41.67 | | B | 7000 | 0.50 | 3500 | 58.33 |
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| 12. | How frequently would the BSE TECk index be reviewed? |
| Ans | The BSE TECk index would be reviewed in the routine Index Committee meeting which meets on a quarterly basis. |
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| 13. | What are the global benchmarks on TMT sectors? |
| Ans | The Nasdaq (US) and Teck MARK (UK) are markets specifically for technology companies. The Nasdaq composite index is the most widely tracked technology stock index in the world. The London Stock Exchange launched in November 1999 a separate market called TECk MARK to meet the unique requirements of technology companies. TechMARK comprises companies from the main market that share a common attribute, in this case a commitment to technological innovation. |
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| 14. | Does the BSE-TECk Index predict where the technology sectors are headed? |
| Ans | Since the BSE-TECk index represents around 90% of the market capitalisation of the TMT sector universe and includes the sector leaders as its constituents, this index is expected to act as a trendsetter for the remaining TMT sector scrips. |
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| 15. | Why is the BSE-TECk index being launched now? |
| Ans | 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 these stocks. During this period of high volatility, both the retail investors and mutual fund managers felt the need of a proper benchmark that could suitably reflect the performance of the TMT sectors. It is to fill this void that the BSE-TECk index is being positioned as a reliable index for benchmarking the performance of the TMT sectors. |
