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Vivek Law
Mumbai, Aug 25: Standard & Poor's has approved the first information technology sector specific index in India. The 20-stock index has been developed by India Index Services & Products Ltd, a joint venture between the National Stock Exchange and Crisil, with which S&P has a licensing agreement. Christened the CNX IT Index, the index has been constructed recently and has been made available to clients, said sources.
The index includes infotech stocks like Aptech Ltd, BFL Software, CMC Ltd, Digital Equipment India Ltd, DSQ Software, Global Telesystems, HCL Infosystems, Infosys Technologies, Leading Edge Systems, Mastek Ltd, NIIT Ltd, Pentafour Software & Exports, Rolta India, Satyam Computers, Silverline Industries, Tata Elxsi, Tata Infotech and Wipro.
"The constituent stocks have been considered based on whether they have more than 50 per cent of their turnover from infotech-related activities like software development, hardware manufacture, vending support or maintenance," said a source, involved with the construction of the index.
"The index is calculated using the market capitalisation weighted aggregate method where individual stocks are weighted by market value. The base period is December 1995, indexed to a value of 1000.
"Therefore, the value of the CNX IT index at any given point of time will reflect the aggregate of the market capitalisation of the index constituents relative to the base value of 1000," the source added.
The index represents over 90 per cent of the market capitalisation in the infotech sector. It represents over 94 per cent of the annual trading turnover among the infotech stocks. According to sources, IISL has put in place a comprehensive monitoring system which will continuously monitor the index constituents on the selection criteria and make adjustments for all corporate actions that impact the market capitalisation of the constituent companies.
The index-focussed company now plans to market the index to mutual funds. While the Unit Trust of India plans to unveil its infotech fund soon, Kothari Pioneer has already launched a fund dedicated to investments in the infotech sector. "With the infotech sector in India growing at a fast rate, there is a need to provide regulators, investors and market intermediaries with an appropriate benchmark that captures the performance of this sector and, hence, the index," said the source.
The index-fund business worldwide is huge with the amount of funds invested on the S&P-500 index close to $ 700 billion. The industry is still nascent in India and is expected to catch up with funds getting more active and derivatives launched in the Indian markets.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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