NSE NV20 Index to go live from Monday – What's New?
NSE indicated that it would start disseminating live the value of the NV20 Index from Monday, 22nd June, 2015. This would create another investment opportunity for investors to invest in NV20 Index ETF apart from having a variety of other uses. What is this NSE NV20 Index is all about? What opportunities would get created from this new NSE NV20 Index? Who can invest in the opportunities that get created from NSE NV20 Index?
What is an NSE NV20 Index?
NSE started computing Index values under NV20 from 2009 onwards. NV20 index consists of top 20 most liquid value, blue chip companies listed in NSE CNX Nifty and provides exposure to 8 broader sectors of the economy. This index consists of top 3 weighted companies like ICICI Bank, Infosy and Reliance Industries Limited (RIL). Apart from this it would contain another 17 companies which are top companies from CNX NIFTY Index which can be liquidated soon.
How does NV20 Index of NSE is computed?
"Stocks are selected on the basis of value parameters like Return on Capital Employed (RoCE), Price to Earning (PE) ratio, Price to Book Value (PB) ratio and dividend Yield (DY). Since the base of the index is CNX Nifty, which is the benchmark index of India, only large & liquid value companies form part of NV20 Index", said Mukesh Agarwal, CEO of India Index Services & Products Ltd (IISL), a subsidiary of NSE Strategic Investment Corporation Ltd.
IISL was set-up to provide varieties of Indices in India and related services to NSE.
What is the beta value of the NV20 Index of NSE?
NV20 beta, which is a measure of volatility or systematic risk is less than 1 for the tenure of greater than 1. Means, if the index moves by 1%, NV20 Index would move less than 1%. If CNX NIFTY Index falls 2%, NV20 would fall by less than 2%. This way, investors are protected from downside with their investment.
What's new in NSE NV20 Index now?
Currently index value is computed only once at the end of the day. From Monday i.e. 22nd June, NV20 Index would be computed live real time. Means, the NV20 Index value would be available every second during the trading time.
What are the advantages of NSE NV20 Index going live?
There are several advantages of NSE NV20 going live.
- New Exchange Traded Fund (ETF) would be created where investors can invest in such most liquidated company’s index.
- A variety of other purposes like issuance of Index Funds (Index Mutual funds) and benchmarking of fund portfolios can be done.
- Structured products can be created.
What are the returns of the NSE NV20 Index in the past?
NV20 Index comprises of 20 most liquid value blue chip companies listed in NSE. NV20 Index gave 15% returns in last 5 years. It gave 20% returns in last 3 years. However, one should note that NIFTY/SENSEX has not zoomed prior to 2013 due to several reasons. After the new government formation was expected it started moving up from late 2013 onwards. Means we can count real market return in the last 1.5 years only.
Conclusion: NSE NV20 Index going live is good news for investors. Conservative investors or investors who want to invest in such liquidated stocks can invest in such index. Mutual fund companies are expected to float new ETF’s once it goes live, where investors would get another set of mutual fund schemes to invest.
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NSE NV20 Index to go live from Monday