The Bombay Stock Exchange (BSE) on October 14, 2022, issued a notification regarding the modification to the Methodology of S&P BSE SENSEX Next 50.
The following modification has been stated:
Constituent Selection.
All companies part of the S&P BSE 100 that are not part of the S&P BSE SENSEX 50 are selected and form the index, subject to the following derivative market linkage constraints:
The individual float-adjusted weight of any share class of a company not linked to derivatives trading cannot exceed 5% of the index.
The aggregate float-adjusted weight of the index constituents not linked to derivatives trading cannot exceed 20%.
If any of the above derivative market linkage constraints are violated, the following relaxation steps are applied in order to comply with these criteria.
1. If the individual float-adjusted weight of any share class of a company not linked to derivatives trading exceeds 5%, the stock is not considered for index selection and the next best eligible stock is selected in the S&P BSE SENSEX Next 50 and consequentially in the S&P BSE 100.
2. If, after step 1 the aggregate float-adjusted weight of the index constituents not linked to derivatives trading exceeds 20%, the lowest-ranked company not linked to derivatives trading is removed and replaced with the highest-ranked eligible company linked to derivatives trading in the S&P BSE SENSEX Next 50 and consequentially in the S&P BSE 100. This process is repeated until the aggregate weight of the index constituents not linked to derivatives trading no longer violates the constraints outlined above.
3. Steps 1 and 2 are repeated iteratively to ensure both of these constraints are met
During the index rebalancing, if any stock was not considered for selection due to the derivative market linkage rule and the relaxation steps stated above, it will be considered for selection in the index only if they have derivative contracts.
This change will be implemented in conjunction with the December 2022 rebalancing, which takes effect prior to the market open on Monday, December 19, 2022. The changes will first be visible to clients in pro-forma files beginning on Friday, December 2, 2022.
[Notice No. 20221014-16]
