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The S&P BSE 500 Index was introduced to offer a more comprehensive view of the Indian equity market beyond the narrow scope of benchmark indices such as the Sensex or the BSE 100. It was designed to include not just large-cap companies but also mid-cap and small-cap segments, enabling a broader market representation.
Over time, the index has undergone various changes, primarily in terms of the companies included. The criteria for inclusion have evolved to ensure that only stocks meeting specific liquidity and trading parameters continue to remain part of the index. This periodic rebalancing helps maintain the index's relevance with changing market dynamics.
The S&P BSE 500 operates on a free-float market capitalisation methodology. Under this approach, only the publicly available shares of a company are considered while calculating the index value, rather than the total market capitalisation. This model reflects the investible portion of the market more accurately.
The index is reviewed and rebalanced semi-annually. Companies are added or removed based on their performance against selection parameters such as trading frequency, average daily turnover, and market capitalisation. The base date of the index is February 1, 1999, with a base value of 1000 points.
The index is often used to track the overall movement and trends in the Indian stock market due to its broad coverage. It includes companies from various sectors, offering a holistic view of market performance. Institutional and retail participants may reference this index to assess how the market is behaving across different segments and industries.
Moreover, the composition of the S&P BSE 500 enables analysis of sectoral performances and emerging market trends. It provides insight into economic shifts, investor sentiment, and company-level developments that may influence stock prices across the spectrum.
Investing in the S&P BSE 500 can be done indirectly through mutual funds or exchange-traded funds (ETFs) that track the index. These funds are constructed to replicate the index composition, thereby mirroring its performance.
Another way to gain exposure to the index is by investing in a diversified basket of stocks from the index. However, this requires access to detailed information and the capability to manage a portfolio manually. Investors often use demat accounts and trading platforms to buy individual stocks or index funds linked to the S&P BSE 500.
The companies included in the index must meet certain liquidity and size requirements. A company should be listed on the Bombay Stock Exchange and must rank within the top 800 companies in terms of average market capitalisation and average daily traded value over a 6-month period.
The stocks should also be traded for at least 90% of the trading days during the review period. Further, the index ensures sectoral balance by including companies from a wide range of industries. This approach enables the index to reflect a broad economic representation without favouring any particular sector.
The S&P BSE 500 is a stock market index comprising a broad range of companies from the Bombay Stock Exchange. It is constructed to reflect movements in the Indian equity market through a diverse set of industry participants. Its methodology, inclusion parameters, and periodic updates help maintain alignment with the evolving nature of the market landscape.
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