Thursday, August 27, 2009

BSE launches IPO index

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The Bombay Stock Exchange announced the launch of a new BSE IPO index that will track the value of companies for two years after listing subsequent to successful completion of their initial public offering.

Robust growth of the Indian economy at 6.7% in 2008-09, and the expectation of higher growth in the future are expected to boost the primary market. For this and other reasons, it looks to be an appropriate time to introduce to the market an indicator that will track primary market conditions in the Indian capital market.

BSE continues to introduce index innovations with the launch of the IPO index, by introducing ceiling (capping) on weightings of index constituents. Market capitalisation weightings of index constituents will be limited to 20%. If a constituent’s market capitalization would result in a higher weighting, the company’s weight will be suitably adjusted to ensure that no single company has a weight in excess of 20% in the index. However, between any rebalancing, weightage of any index constituent can exceed 20%.

Summary of guidelines followed for BSE IPO index are as follows:
1. A company seeking listing on the Exchange after completion of IPO shall be considered eligible for inclusion in the index. Follow-on public issues shall not be considered for inclusion in the index.
2. A scrip must have the minimum free-float market capitalisation of Rs 100 crore on its first day of listing.
3. A scrip will be included in the index on the third day of its listing (T+2) subject to fulfillment of the minimum free-float market capitalisation criteria stated above.
4. A scrip will be excluded from the index on the second Monday of the month after completion of two years of listing.
5. At all time a minimum of 10 scrips shall be maintained in the index. In case, there are less than 10 companies on account of possible exclusion after two years, the exclusion of such company shall be delayed till such time new inclusion is made in the index.
6. The maximum weight of any scrip shall be capped at 20%. The constituent weightage shall be reviewed at the time of inclusion/exclusion of a scrip and on monthly rebalancing. However, between any rebalancing, weightage of any index constituent can exceed 20%
7. Base date of the index is May 3, 2004; while base index value is set to 1000 points. Index value on August 21, 2009 is 1901.67.
8. The index would be calculated and disseminated on a real-time basis through BOLT effective August 24, 2009.
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