Complete Guide to BSE 100 Index: Selection to Investment Process

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In the stock market, the most important stocks are those, which are traded regularly and actively. These are the most liquid companies as well which offer the investors and traders the confidence of putting their money into them without getting afraid of not being able to sell the stocks easily. However, how will you find out these stocks? Is there a list of these stocks or anything? Yes, BSE has come to the rescue and BSE 100 Index is exactly what you are looking for. 

In this article, we will discuss the BSE 100 index in detail, from its constituents to the selection criteria for the index, the calculation of the index value, the investment process, and more. 

BSE 100 Index – Overview & Constituents 

The BSE 100 index was introduced back in 1989 to track the performance of the top 100 companies by liquidity quotient, traded on the Bombay Stock Exchange. The index has a mix of most traded, liquid, and active large and mid-cap stocks. Earlier it used to be known as the BSE National Index, in 1999, 10 years after its launch, the name of the index was changed to its current BSE 100 Index. 

The broad market equity index represents almost 2/3rd of the market capitalization of BSE. The index is updated two times a year once in June, and again in December. This index is one of the oldest indexes of BSE and is still one of the most popular ones. 

The constituents of the index are derived from the BSE LargeMidCap segment and the maximum number of stocks in the index can be 100. Here is the current list of the constituents of the bse index – 

ADANI ENTERPRISES LTD.INDUSIND BANK LTD.
ADANI PORTS AND SPECIAL ECONOMINFO EDGE (INDIA) LTD.
AMBUJA CEMENTS LTD.INFOSYS LTD.
APL APOLLO TUBES LTD.InterGlobe Aviation Limited
APOLLO HOSPITALS ENTERPRISE LTITC LTD.
ASHOK LEYLAND LTD.JSW STEEL LTD.
ASIAN PAINTS LTD.KOTAK MAHINDRA BANK LTD.
AU Small Finance Bank LimitedLARSEN & TOUBRO LTD.
Avenue Supermarts LimitedLTIMindtree Limited
AXIS BANK LTD.LUPIN LTD.
BAJAJ AUTO LTD.MAHINDRA & MAHINDRA LTD.
BAJAJ FINANCE LIMITEDMARICO LTD.
BAJAJ FINSERV LTD.MARUTI SUZUKI INDIA LTD.
BAJAJ HOLDINGS & INVESTMENT LTMax Healthcare Institute Limit
BANK OF BARODANESTLE INDIA LTD.
BHARAT ELECTRONICS LTD.NTPC LTD.
BHARAT FORGE LTD.OIL AND NATURAL GAS CORPORATION
BHARAT PETROLEUM CORPORATION LP.I.INDUSTRIES LTD.
BHARTI AIRTEL LTD.PERSISTENT SYSTEMS LTD.
BRITANNIA INDUSTRIES LTD.PIDILITE INDUSTRIES LTD.
CANARA BANKPOWER FINANCE CORPORATION LTD.
CHOLAMANDALAM INVESTMENT AND FPOWER GRID CORPORATION OF INDI
CIPLA LTD.PUNJAB NATIONAL BANK
COAL INDIA LTD.REC LIMITED
COLGATE-PALMOLIVE (INDIA) LTD.RELIANCE INDUSTRIES LTD.
CUMMINS INDIA LTD.SBI Life Insurance Company Lim
DABUR INDIA LTD.SHREE CEMENT LTD.
DIVIS LABORATORIES LTD.Shriram Finance Limited
DLF LTD.SIEMENS LTD.
DR.REDDYS LABORATORIES LTD.SRF LTD.
EICHER MOTORS LTD.STATE BANK OF INDIA
FEDERAL BANK LTD.SUN PHARMACEUTICAL INDUSTRIES
GAIL (INDIA) LTD.TATA CONSULTANCY SERVICES LTD.
GODREJ CONSUMER PRODUCTS LTD.TATA CONSUMER PRODUCTS LIMITED
GRASIM INDUSTRIES LTD.TATA MOTORS LTD.
HAVELLS INDIA LTD.TATA POWER CO.LTD.
HCL TECHNOLOGIES LTD.TATA STEEL LTD.
HDFC Asset Management CompanyTECH MAHINDRA LTD.
HDFC BANK LTD.TITAN COMPANY LIMITED
HDFC LIFE INSURANCE COMPANY LITRENT LTD.
HERO MOTO CORP LTD.Tube Investments of India Ltd
HINDALCO INDUSTRIES LTD.TVS MOTOR COMPANY LTD.
Hindustan Aeronautics LimitedULTRATECH CEMENT LTD.
HINDUSTAN UNILEVER LTD.UNITED SPIRITS LTD.
ICICI BANK LTD.UPL LIMITED
ICICI Lombard General InsuranceVarun Beverages Limited
IDFC FIRST BANK LIMITEDVEDANTA LIMITED
INDIAN HOTELS CO. LTD.WIPRO LTD.
INDIAN OIL CORPORATION LTD.YES BANK LTD.
Indian Railway Catering and ToZomato Limited

Selection Criteria

The stocks in the BSE 100 INDEX are selected based on – 

  • The annualized traded value of the stocks must be higher than or equal to ₹ 1000 crore. The current annual traded value is ₹ 800 crore, which is also considered provided the stock meets other eligibility criteria. 
  • Preceding six months of the stock selection day, the stock must not have more than five non-trading days. 
  • Now stocks satisfying the first criteria are ranked on the basis of average daily float-adjusted market capitalisation. The top 80 companies are selected immediately according to the ranking order. Then within 80th to 120th companies are ranked according to the traded value, if 20 more stocks can be selected then the index inclusion is complete however, if not, non-constituents are picked according to the highest rank. 
  • There are derivative market linkages of the constituents which are also considered –
    • The individual float weight of any share class of any firm cannot go above 5% if it is not linked to derivative trading. 
    • Index constituents without any link to derivative trading, cannot have aggregate float weight above 10% 
  • If the derivative linkage criteria are not met, then the next stock is evaluated as per the ranking. 

Factors Affecting BSE 100 Index

As this bse index is constituted of the top 100 liquid stocks of the BSE universe, the following factors affect the index the most – 

  • Overall market sentiment: The best thing about the most liquid stocks is that they are less volatile and thus if there is a strong stimulus in the market driven by strong negative or positive sentiments, then the constituting stocks of the BSE 100 affect which influence the index in turn. For instance, there is a geopolitical turmoil that takes over the market, or change in government, natural disasters, etc.
  • Earnings reports: The next factor that can affect the BSE 100 index is the earnings report of the constituting BSE 100 Index companies, annual reports, and quarterly reports. If the reports are as per anticipation, or positive, it can take the index higher and vice versa. 
  • Corporate announcements: Similar to earnings reports, corporate announcements can affect the index. If the constituting companies announce something big and significant or any regulatory bodies snap any charges on them, which is of a huge amount or so, the prices of the stocks will move up and down, and thus the index will be affected.  
  • Interest rates: Interest rates and the BSE 100 index like any other equity index are correlated. When the interest rate goes up in an economy, the loans become expensive, which leads to a decline in business activity, and thus the stock prices tank and this in turn takes the index down and vice versa. 
  • Dividends: When BSE 100 index companies announce dividends, the stock price of the company/s moves significantly, this can also have an effect on the index. 

BSE 100 Index Calculation Method

For the calculation of the BSE 100 index value, the following formula is used – 

Index Value = Current Market Capitalization/ (Base Market Capitalization * Base Index Value)

Here for the market capitalization, the float-adjusted market cap weighted method is used where the market capitalization is considered based on the float-adjusted value. Once the market capitalization of each of the constituents is determined, they are summed up and used as the current market capitalization. 

Performance and Returns

The performance of the BSE 100 index has remained not only positive but also it has remained strong consistently. The 10-year return stands at 13.26%, while the 5-year return stands at 17.83%, and in the past year, the index has given around 32.19%. However, due to the recent slowdown in the market, the past 3-month return has tanked to a negative of 3.14% and the past 1-month return has been down at negative 6.54%. 

Risk and Volatility

While the returns have been great and the performance there are risks associated with the index as it deals with equities only. The annualized risk-adjusted returns for the index are as follows – 

3-year – 0.96

5-year – 0.85

10- Year – 0.71

While the annualized risk for the following are – 

3-Year – 12.89%

5-Year – 19.16%

10-Year – 16.57%

How to Invest in the BSE 100 Index?

You can invest in the BSE 100 index using ETFs or index funds or trade them on the trading platform. You can also trade BSE 100 INDEX futures and BSE 100 INDEX options in the F&O section of Shoonya’s app. To do so, you have to add the index to your watchlist following these steps – 

  • Open the Shoonya app.
  • Head to the “Watchlist” tab located at the bottom of your screen.
  • In the search bar, type “BSE 100 INDEX” add it to the watch-list, and then you will be able to see the indices.
  • Once you find your desired index, click on add option given on the right side
  • Now you can see the index on the watchlist.

However, by default, four indices are added to Shoonya’s Web platform, including the BSE 100 INDEX. 

If you are using Shoonya’s App, you can directly add the BSE 100 index from the dashboard. 

Conclusion

This index of bse has been one of the most popular indices in the Indian stock market. It not only offers a tracking base for the most liquid stocks in the market but also helps many to invest in them directly via index funds and ETFs. While the performance of the BSE 100 index has remained consistent over the years, the risk factor cannot be ignored and thus you need to be analytical and wise without your investment choices. 

Trade in BSE100 Index – Open Your Free Demat Account Today!

FAQs| BSE 100 INDEX

What is the float-adjusted market Cap Weighted Index?

BSE 100 index is a float-adjusted market cap index where the market capitalization of each of the constituting stocks is first adjusted to the float factor and then their weights are decided.

When BSE 100 INDEX is rebalanced?

The index is rebalanced every six months that is in June and December every year.

What is the PE of the BSE 100 index currently?

The current PE of the BSE 100 index is 24.01.

Which are the top five constituents of the BSE 100 index?

The top five constituents include – HDFC Bank, ICICI Bank, Reliance Industries, Infosys, ITC

What is the rebalancing and calculation frequency of the index?

The BSE 100 index is calculated on a real-time basis, while the rebalancing is done every six months in June and December.

Source: BSESensex

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Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.