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April 03, 2019 location Mumbai

CRISIL launches first series of broad-based debt indices

Also unveils a money market index for ULIPs

CRISIL Research, India’s largest independent and integrated research house, today announced the launch of nine indices – four in the broad government securities (G-sec or gilt) segment and five in the money market segment.


The broad-based gilt indices will be all-inclusive – meaning these will consider all eligible securities as constituents – unlike liquidity-based ones that select only the top liquid securities.


Says Prasad Koparkar, Senior Director, CRISIL Research, “Globally, the number of constituents of an index is not restricted based on liquidity or other fundamentals. The launch, therefore, bolsters CRISIL’s credentials as the pioneer of debt indices in India. Our broad-based indices also gain relevance as the Indian market becomes more conducive to passive products such as exchange traded funds and index funds.”


Broad-based indices can be replicated by using a sampling approach, where each risk bucket of the index is replicated by using a security having similar risk characteristics. These will follow the buy-and-hold strategy instead of reconstituting on a monthly basis to exclude off-the-run issues and will therefore have lower churn.


CRISIL has data for these indices going back 15 years.


At the other end, the five money market indices announced include one designed from the perspective of the insurance industry. It would be in compliance with the investment restrictions and constraints prescribed by the insurance regulator.


Bhushan Kedar, Director, CRISIL Research, said, “From an end-investor’s standpoint, appropriate benchmarking is essential and given the unique investment norms for the insurance industry, there is clearly the need for a specific set of indices. For instance, unlike mutual funds, which have different sectoral limits, insurance funds are not allowed to take more than 25% exposure to the banking, financial services and insurance (BFSI) segment. Our new money market index for insurance will follow the sector guidelines and will have portfolio characteristics that represent the risk-return profile of ULIP funds.”


The other four money market indices are in the lower-maturity range (1-2 months) across commercial paper (CP), certificate of deposit (CD) and Treasury bill (T-bill) indices.


With the Securities and Exchange Board of India amending valuation norms of debt securities for mutual funds, and lowering the amortisation threshold to 30 days from the earlier 60 days, is expected to bring greater dynamism in this segment. The four indices across CP, CD and T-bill categories, launched in October 2018, will help capture performance of this segment.


The nine indices unveiled increase CRISIL’s tally to 96 standard indices – across bond, gilt, money market, hybrid and commodity segments – that are used widely by asset managers to benchmark their products and portfolios.


The new indices are CRISIL 1 Month CP Index, CRISIL 1 Month CD Index, CRISIL 1 Month T-Bill Index, CRISIL 2 Month T-Bill Index, CRISIL Money Market Index - Insurance, CRISIL Broad Based Gilt Index, CRISIL Broad Based Long Term Gilt Index, CRISIL Broad Based Medium Term Gilt Index and CRISIL Broad Based Short Term Gilt Index.


For the record, CRISIL Broad Based Gilt Index has returned 7.72% annualised compared with 7.34% by CRISIL Dynamic Gilt Index – its liquidity-based counterpart – in the last 15 years. It has even outperformed an index representing the performance of gilt funds by 65 bps.


All CRISIL indices are public indices with details on index performance and portfolio constituents available on the CRISIL website (www.crisil.com) daily.


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  • Analytical contacts

    Bhushan Kedar
    Director, CRISIL Limited

  • Prasad Koparkar
    Senior Director, CRISIL Limited