S&P BSE Auto

What is S&P BSE Auto?

The automobile industry is one of the most important industries in India, with a GDP contribution of around 7.1% and a manufacturing GDP of 49%. The Indian Automotive industry is the fourth largest in the world in terms of valuation. Automobile stocks are among the top choice of investors as it is a fast-growing industry and reflects the country’s economic growth.

The automobile industry includes all the companies that are involved in the manufacturing and distribution of automobiles such as two-wheelers and four-wheelers. It not only involves the companies that manufacture cars and bikes but also consists of those companies that manufacture the parts and components of the vehicles. 

Having said that, tracking the performance of the auto sector can help get an overview of the economic growth of the country. S&P BSE Auto is an index that has been designed to reflect the prices of companies that deal in transportation equipment. It reflects the performance of each sector and the impact of policy changes and the economic environment on the performance of the stocks. The constituents of this index are selected from the BSE 500 index, which consists of the top 500 stocks across all index categories. The companies classified as members of the transportation equipment sector by BSE are included in the BSE Auto index. 

The S&P BSE Auto index was launched on August 23, 2004. The BSE Auto share price is calculated in real-time and is reflected in both USD and INR. Currently, there are 15 stocks on the S&P BSE auto index, and it holds a market cap of INR 717,194.5 million. The year 1999 has been taken as the base year for calculating the index value. 

Unlike the sectoral indices like BSE utilities and telecom, BSE Auto uses the float-adjusted market capitalization method to calculate the value of the index. Under this method, the total market cap of the stocks is adjusted against the freely tradable shares to determine the float-adjusted market cap. The BSE auto stocks are rebalanced twice every year in June and December. 

How is S&P BSE Auto Calculated?

The BSE auto index is calculated using the free-float market capitalization method. It excludes the value of privately held shares from the total market cap and includes only the shares available for trading on the stock exchange while doing the calculation. Let us understand this with the help of an example -

Company M has 5 lakh shares on the stock exchange. Out of these, only 70% can be traded freely on the exchange. The market price of the stock is INR 1000. Then, it will be calculated as follows -

The float-adjusted market cap of all the constituents will be added, and the value will then be divided by the market cap of the base year and multiplied with 100 to arrive at the BSE Auto share price. 

Here is the formula -

Criteria for Selecting Stocks

There are a few conditions that every stock needs to meet to get selected in the BSE auto index. Given below are the conditions -

• All the constituents of the exchange should be a part of the BSE 500 index. 
• The market cap of the stock is calculated as the average of the float-adjusted market cap for the last three months. In other words, the float-adjusted market cap of the previous three months is calculated, and its average is considered. 
• The stocks must have been traded for at least 90% of the trading days in the last three months preceding the date of reference.