S&P BSE IPO Index outperforms Sensex; know more about the index that tracks IPOs performance

Here’s some good news for active investors, who are looking to beat Sensex returns!

Active investors have only one goal in mind and that is, to beat the benchmark index returns. Most investors are looking to beat Sensex returns and are happy to do that consistently. 

Here’s some good news for active investors, who are looking to beat Sensex returns! 

S&P BSE IPO index, which is based on the strategy of tracking the performance of the recently-listed IPOs, has been able to outperform Sensex almost on every other timeframe that we want to consider. 

BSE IPO index is up by over 29.77 per cent on a YTD basis when Sensex is up by 8.32 per cent. In a period of one year, the IPO index is up by 114 per cent vs 52 per cent for Sensex. Besides, in three-year and five-year periods, the IPO index is up by 221 per cent and 410 per cent, respectively as compared to Sensex’s performance of 91 per cent and 243 per cent, respectively during a similar period.

On an annualised basis, the performance of BSE IPO comes to about 26.46 per cent (over three years), 26.7 per cent (over five years), and 18.83 per cent (over 10 years). These returns are superlative and clearly beat Sensex returns. 

S&P BSE IPO index is designed to measure the performance of companies listed at BSE Limited. After the completion of their initial public offering (IPO). S&P BSE IPO is the only index in India that measures the performance of the companies listed via IPO. The index is calculated using a modified market cap-weighted methodology. At each rebalancing, the maximum weight of each constituent is capped at 20 per cent. 

How are constituents selected for BSE IPO Index?  

The IPO company that has a float-adjusted market cap of minimum of Rs 100 crore on the third day of the listing, makes it to the index. The index constituents, which have completed one year of listing after their IPO, are removed from the index. The index must maintain a minimum of 10 stocks. Only those companies that are listed on BSE after IPO completion are included. 

The top 10 constituents of BSE IPO index are Gland Pharma, CAMS, Happiest Minds, Indian Railway Finance Corporation, Macrotech Developers, UTI AMC, Route Mobile, Indigo Paints, Burger King, and Angel Broking. 

The huge outperformance of BSE IPO index over Sensex points to the fact that an individual investor can attempt to construct a portfolio of stocks that are recently listed with a time horizon of a minimum of one year and expect to beat Sensex. Having said that, the weightage calculation is not easy and choosing all the IPOs that fit the investment criterion may not be possible for every investor. As of now, BSE IPO index has 29 constituents.