BSE Launches 4 New Indices

This week, BSE (Bombay Stock Exchange) launched four factor-based indices through its subsidiary Asia Index. We know you are wondering - what are factor-based indices and the Asia Index? Let us understand them and also look at the new indices.

What is the Asia Index?

Asia Index is a 50-50 partnership between S&P Dow Jones Indices LLC, the world’s largest provider of financial market indices, and BSE Ltd, Asia’s oldest stock exchange and home to the iconic SENSEX index - a leading indicator of Indian equity market performance. Asia Index Pvt. Ltd, which combines the benchmarks, market intelligence, and insights of both parent companies, each established more than 115 years ago, aims to provide a full array of indices enabling global and domestic investors to participate in South Asia’s vibrant economies. The Company is best known for calculating, publishing, and maintaining a diverse family of Asian indices under the umbrella brand, S&P BSE Indices.

What are Factor-Based Indices?

Factor-based indices are stock market indices that select and weight constituents based on specific "factors" — quantifiable characteristics that help explain differences in stock returns. These indices aim to outperform traditional market-cap-weighted indices or achieve better risk-adjusted returns by targeting proven performance drivers. Below are common factors in factor-based indices:

• Value – Stocks trading at low valuation multiples (like P/E or P/B).
• Quality – Stocks with strong balance sheets, high profitability, and stable earnings.
• Low Volatility – Stocks with less price fluctuation over time.
• Momentum – Stocks that have shown strong price performance in the recent past.
• Size – Smaller companies tend to outperform larger ones over the long term.
• Dividend Yield – Stocks with consistently high dividend payouts.

Four New Indices Launched by BSE

The four new indices launched by BSE are BSE 500 Enhanced Value 50, BSE 500 Low Volatility 50, BSE 500 Momentum 50, and BSE 500 Quality 50. The details are mentioned-below:

1. BSE 500 Enhanced Value 50: It captures the performance of 50 companies within the BSE 500 Index that exhibit the most attractive valuations. Companies are selected based on their value scores, which consider price-to-earnings, price-to-book, and price-to-sales ratios.
2. BSE 500 Low Volatility 50: It focuses on the 50 least volatile companies in the BSE 500 Index, aiming to provide more stable returns. Companies are selected based on their historical price volatility, with the least volatile stocks being chosen.
3. BSE 500 Momentum 50: Tracks the performance of 50 companies in the BSE 500 Index that exhibit strong momentum characteristics. Companies are selected based on their momentum scores, which consider recent price performance adjusted for volatility.
4. BSE 500 Quality 50: It measures the performance of the 50 highest quality companies in the BSE 500 Index. Companies are selected based on quality scores, which assess factors like return on equity, financial leverage, and earnings variability.

Many More Indices to Come

In FY25, BSE and NSE together rolled out an impressive 41 new indices, averaging over three launches per month. This marks a sharp acceleration in activity compared to previous years: NSE had introduced only seven indices combined in FY23 and FY24, while BSE had not launched any during that period, as per data from Asia Index services arm.

Riding on the surge in passive investing and demand for thematic and factor-based products, Asia Index now plans to significantly scale up its offerings. The index provider is targeting the launch of up to 40 new indices across sectors and strategies in FY26, nearly double the number introduced in FY25. At a run rate of two to three indices per month, they expect to launch around 40 indices this year, underlining their commitment to catering to the evolving needs of passive investors and asset managers.