BSE moves towards factor investing, launches 4 new indices from BSE 500 universe

Asia Index, a wholly owned subsidiary of BSE, has announced the launch of four new BSE Factor Indices derived from the BSE 500 Index universe—Value, Low Volatility, Quality, and Momentum—along with the introduction of quarterly reconstitution for these indices.

Ashutosh Singh, MD and CEO of Asia Index, highlighted the importance of this development, stating:
“The launch of four new factor indices expands our suite of smart beta offerings. These indices are designed to provide market participants with targeted exposure to key investment factors such as value, low volatility, momentum, and quality using a transparent and rules-based approach. The introduction of a quarterly reconstitution schedule in our factor indices will enable factor signals to capture the most recent financial and stock price data.”

According to Singh, factor-based investing began gaining traction in India only over the past 5–6 years, but the growth has been significant. “In just a few years, AUM in factor strategies has grown from Rs 100 crore to Rs 40,000 crore,” he said. This rise is largely driven by millennials and Gen Z entering the markets.
“As millennials and Gen Z came into the market, they were clearly not very interested in purely passive strategies. They wanted investment strategies that balance the passive and active approaches—and that’s where factor investing begins,” Singh added.

Each of the new indices has a base value of 1000, with the first value date set as June 20, 2005. Constituents are also screened for liquidity and capped at 4%. These indices can be used for passive strategies such as ETFs and index funds, as well as for benchmarking PMS strategies, mutual fund schemes, and other investment portfolios.

The newly launched indices include:

BSE 500 Enhanced Value 50: Tracks the performance of 50 companies from the BSE 500 with the most attractive valuations, based on value scores.

BSE 500 Low Volatility 50: Measures the performance of the 50 least volatile companies in the BSE 500, weighted by inverse volatility scores.

BSE 500 Momentum 50: Captures the 50 companies exhibiting the strongest momentum (adjusted for volatility), based on momentum scores.

BSE 500 Quality 50: Represents the 50 highest quality companies in the BSE 500, based on their quality scores.