March 20, 2015

NSE Quality 30 index

NSE Quality 30 Index aims to cover companies which have durable business model resulting in sustained growth. This index consists of 30 companies which are selected based on low gearing, high return on equity and profit growth.

Initial selection:

Companies must rank within top 200 by average free-float market capitalization and aggregate turnover for the last six months.

Companies with negative net worth, IWF less than 10% and trading frequency of less than 90% in previous 6 months are excluded.

Posts applying above criteria, pool of top 100 companies are selected by average free-float market capitalization in the last six months.

Security selection:

Companies which incurred loss (negative PAT) in any of previous 3 financial years are excluded.
Quality score is calculated on the basis of Return on equity (ROE), Debt equity ratio (D/E) and Average change in PAT in previous 3 financial year

Latest fiscal year data is considered for the calculation of ROE and D/E ratio. Average change in PAT in previous 3 financial years is calculated using latest 4 years data. Consolidated fiscal figures are used wherever available else standalone fiscal data is taken into consideration.

Companies which are not IRDA dividend norm compliant will be excluded from October 2014 onwards

Top 30 companies are selected on the basis of Quality score for NSE Quality 30 Index.

Rebalancing will be done on an annual basis in the month of October

NSE Quality 30 Index will have buffer of 100% (Rank-60) on quality score during rebalancing. Aim is to reduce the churn in the portfolio.

More info at NSE website - Methodology document

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