Mutual Funds: How does the BSE 500 index offer exposure to a wide basket of stocks?
ETF or an index fund routes are available for taking exposure to the index. The index is rebalanced on a semi-annual basis. For an investor, the index serves as an ideal multicap passive fund and can be a key component in their portfolio.Represents almost the complete market: As mentioned earlier, the market capitalization of all BSE-listed companies totals up to ₹393 trillion.
The S&P BSE 500 index’s market capitalization alone comprises ₹351 trillion (as of April 19). Therefore, the index represents nearly 90 per cent of the overall market capitalization. As a benchmark, it helps investors by capturing a giant share of the overall market trend.A multicap passive fund: The index provides access to as many as 100 large caps, 150 mid caps and 250 small caps in varying proportions.
For investors, this gives a chance to gain from a multicap approach via the passive route, giving exposure to every market segment. Large companies have high margins, strong brands, steady cash flows and robust balance sheets. Mid and small caps usually have healthy growth prospects with respect to their sales and profits.Excellent diversification: A 500-stock portfolio is a great diversifier in itself.
As many as 22 different sectors get representation in the S&P BSE 500 index, thus providing considerable balance to the portfolio.Cyclical, defensive, interest-rate sensitive and new-age companies would all figure in the index. So, when some sectors find the going tough, others would compensate by doing well. Also, many new age sectors, realty companies, capital goods and engineering companies and even small finance banks figure in the overall index.Investing passively: Taking exposure to the S&P BSE 500 via the ETF or index route would provide a
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