Description

BSE announces methodology changes to BSE 500 and BSE 500 Shariah indices affecting constituent selection criteria and accounting screens.

Summary

BSE Index Services announces methodology changes to BSE 500 and BSE 500 Shariah indices. BSE 500 will transition from BSE AllCap to BSE 1000 universe with new ranking criteria based on traded value and market cap. BSE 500 Shariah reduces non-permissible revenue threshold from 4% to 3%.

Key Points

  • BSE 500 methodology changes effective December 22, 2025
  • BSE 500 Shariah accounting screen changes effective September 22, 2025
  • New dual ranking system for BSE 500 constituent selection
  • Eligible universe shifts from BSE AllCap to BSE 1000 Index
  • Stricter Shariah compliance requirements implemented

Regulatory Changes

BSE 500 Index Changes:

  • Eligible universe changed from BSE AllCap Index to BSE 1000 Index constituents
  • New constituent selection requires ranking in top 750 stocks by both annualized traded value and 6-month average free float market cap
  • Maintains 80% trading day requirement during six-month reference period
  • Target company count remains 500 with flexibility mechanism

BSE 500 Shariah Changes:

  • Non-permissible revenue threshold reduced from 4% to 3% of total revenue
  • Debt to total asset ratio remains at 25%
  • All other business compliance screens unchanged

Compliance Requirements

  • Index constituent companies must meet new ranking criteria during rebalancing periods
  • Shariah-compliant companies must ensure non-permissible revenue stays below 3%
  • Companies must maintain minimum 80% trading frequency at BSE
  • Ongoing monitoring of debt and revenue ratios for Shariah index

Important Dates

  • September 22, 2025: BSE 500 Shariah accounting screen changes effective
  • December 22, 2025: BSE 500 methodology changes effective
  • Semi-annual rebalancing periods for constituent review

Impact Assessment

The changes will affect index composition and may lead to constituent changes during rebalancing. Portfolio managers tracking these indices need to prepare for potential turnover. The stricter Shariah compliance may exclude some current constituents. Market impact expected to be moderate given the advance notice period and gradual implementation.

Impact Justification

Methodology changes affect major BSE indices but are implemented gradually with sufficient notice period