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Calculation and Maintenance of the indices: |
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Calculation of Index:
The indices are calculated on a daily basis by applying the following formulae: |
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Market Cap = Listed number of shares x price
Base Market capitalization of the index = It's an base index number as on the first day of the index used as divisor for computing the index. It is adjusted for any corporate actions to maintain the continuity of the index.
Base Adjustment Formulae: |
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Adjustment for Additions, Deletions and Newly issued Capital: |
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Whenever there is any corporate action leading to change in equity of the company, suitable adjustments to the base divisor of the index shall be done so as to main the continuity of the index. The arithmetic calculation involved in calculating Indices is simple but the problem arises when there is any corporate action like issue of new shares by an existing component of the index, addition or deletion from the index etc. If no adjustments were made, a discontinuity would arise between the current value of the index and its previous value as illustrated below.
The Index Product Group of ACML keeps a close watch on the events that might affect the index on a regular basis and carries out daily maintenance of the Indices. The source for tracking Corporate actions is Reuters Data Scope, BSE Website etc. |
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Adjustments for Inclusions and Exclusions in the Index: |
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Inclusion:
Whenever any new company is added or removed from the index after satisfying the criteria's appropriate adjustment to the base divisor of the respective index is made. This can be illustrated by the following real example:
Jai Prakash Hydro Power Limited was listed on 18th April' 2005 and its market capitalisation based on the issue size and issue prices was Rs. 1571.20 crores and was subsequently included in the Atherstone India IPO Large Cap Index on 18th April' 2005. The effect of this corporate action in the Atherstone India IPO Large Cap Index was given on 15th April' 2005 after the close of market hours (16th and 17th April' 2005, being trading holidays) in the following manner.
Old Base Market Capitalisation as on 15th April'05 was: 26438.37 crores
Old Free Float Market Capitalisation as on 15th April'05 was: 25980.71 crores
New FF Market Capitalisation as on 15th April'05 (after adding Jai Prakash Hydro Power Limited's Free Float Market capitalization) was: 26490.98 crores.
Base Adjustment was done by using the following formulae: |
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New Base Market Cap = 26865.86 crores.
The index in future will be calculated by using these New Base Market Cap until any New Corporate Action takes place. |
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Deletion:
Similarly, Tulip IT Services Limited was removed from Atherstone India IPO Mid-Cap index on 4th July' 2006 after completion of six months of trading from its listing date. The effect of this corporate action in the Atherstone India IPO Mid-Cap Index was given on 04th July' 2006 after the close of market hours in the following manner.
Old Base Market Capitalisation as on 04th July' 2006 was: 653.15 crores
Old Free Float Market Capitalisation as on 04th July' 2006 was: 1532.77 crores
New FF Market Capitalisation as on 04th July' 2006 (after removing Tulip IT Service Limited's Free Float Market capitalization) was: 1270.19 crores.
Base Adjustment was done by using the following formulae: |
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New Base Market Cap = 541.26 crores.
The index in future will be calculated by using these New Base Market Cap until any New Corporate Action takes place. |
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Adjustment for Other Issues: |
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Base Market Capitalisation Adjustment is required when new shares are issued by way of rights issue, conversion of debentures, ESOPs, green Shoe options, mergers, spin-offs etc. or when equity is reduced by way of buy-back of shares, corporate restructuring etc. In case of Bonus and Stock Splits no adjustment to the Base Divisor of the Index is made as there is no change in market capitalisation of the index due to Bonus or Stock Splits.
The base adjustment is carried out in a similar fashion as described above.
For eg: Cairn India Limited issued 1,30,85,041 Equity shares by way of Green Shoe Option on 29th March, 2007. The effect of this corporate action in the Atherstone India IPO Large-Cap Index was given on 28th March' 2007 after the close of market hours in the following manner.
Old Base Market Capitalisation as on 28th March' 2007 was: 7066.19 crores
Old Free Float Market Capitalisation as on 28th March' 2007 was: 25272.07 crores
New FF Market Capitalisation as on 28th March' 2007 (after adjusting Cairn India Limited's Free Float Market capitalization on account of Green Shoe Option) was: 25304.69 crores.
Base Adjustment was done by using the following formulae: |
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New Base Market Cap = 7075.31 crores.
The index in future will be calculated by using these New Base Market Cap until any New Corporate Action takes place. |
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