BANKEX

India’s stock market offers a variety of indices to capture the ups and downs in the stock market. While broad indices like Sensex and BSE 500 track companies across industries, focused indices like Bankex zoom in on specific industries. The BSE Bankex, also known as the S&P BSE Bankex, is a vital stock market index for investors tracking the Indian banking sector. It serves as a benchmark that tracks the performance of a basket of companies classified under the banking sector by the Bombay Stock Exchange (BSE). Launched in 2003, the BSE Bankex tracks India’s leading banking stocks, currently comprising the top 10 by market capitalisation and representing over 90% of the banking sector’s total value.

The Bankex Index is a free-float market capitalization weighted index. This means the influence of each company within the BSE Bankex is determined by two key factors:

• Market Capitalisation: The total market value of a company's outstanding share is known as market capitalisation. The top 10 baking stocks by market cap from the BSE 500 are included in the BSE Bankex.
• Free Float: The percentage of a company's shares readily available for trading in the public market. Only this portion is considered for weightage in the BSE Bankex, ensuring that the Bankex index reflects the publicly traded portion of the banking sector.

The S&P Dow Jones Indices, in collaboration with the BSE, calculates and disseminates the Bankex Index value throughout the trading day. This value reflects the overall performance of the banking sector, allowing investors to gauge its health and make informed investment decisions. Furthermore, the S&P BSE Bankex is reviewed and rebalanced twice a year, in January and July. This ensures that the index stays relevant by reflecting the ongoing changes in the Indian banking landscape. 

Companies included in the S&P BSE Bankex or BSE Bankex are those classified as banks according to the BSE industry classification system. To be eligible for Bankex, these companies must also be constituents of the S&P BSE 500, a broader index encompassing the top 500 companies listed on the BSE. 

BSE Bankex stock selection criteria are rigorous and focus on the following key aspects:

• Market Capitalization: Only the top 10 companies by market capitalisation (average over the past 3 months) are eligible for inclusion in the BSE Bankex.
• Liquidity: High liquidity ensures the smooth functioning of the BSE Bankex. To be part of the BSE Bankex, a stock must have been traded on each trading day in the past 3 months.
• Listing Requirement: The BSE Bankex typically requires a minimum of 3 months listing history for inclusion. However, a newly listed company with a market capitalisation ranking among the top 10 in the entire BSE universe may be considered as an exception.

By focusing on these criteria, the BSE Bankex ensures it accurately represents the performance of leading and financially sound banking institutions in India. 

While you cannot directly invest in the Bankex itself, there are two primary ways to gain exposure to its performance:

• Investing in Individual Bankex Stocks: Researching and investing in the stocks of companies that make up the Bankex allows you to target specific banks with high growth potential.
• Exchange Traded Funds (ETFs): Several ETFs track the Bankex Index. By investing in these ETFs, you gain diversified exposure to the entire basket of companies within the Bankex, offering a broader approach to capturing the banking sector's performance.
• Derivatives Trading (FnO): BSE offers derivatives trading, where you can trade Futures and Options contracts based on the Bankex Index. These contracts speculate on the future movements of the index.

Investing in the Bankex can offer several advantages:

• Diversification: A single investment in the Bankex provides exposure to a basket of leading banks, spreading out risks as opposed to concentrating it to individual stocks.
• Growth Potential: The Indian banking sector plays a vital role in the country's economic growth. By aligning with the Bankex, you can potentially benefit from the overall growth of the banking industry.
• Market Performance Benchmark: The Bankex serves as a valuable benchmark to compare the performance of individual bank stocks or your own banking sector portfolio.

The BSE decided to create a separate index specifically to track the banking stocks on June 16^th, 2003. With a base value of 1000 points, the base date for the BSE Bankex was set as January 1^st, 2002. The BSE Bankex initially included 12 banking stocks, representing roughly 90% of the total market capitalisation of all banking sector stocks listed on the BSE. The Bankex has played a crucial role in the Indian financial market, providing valuable insights for investors interested in the banking sector's health and growth potential.