NSE Government Securities Index
The increased activity in the government securities market in India and simultaneous emergence of mutual (gilt) funds has given rise to the need for a well-defined Bond Index to measure returns in the bond market. The NSE-Government Securities Index prices components off the NSE Benchmark ZCYC, so that movements reflect returns to an investor on account of change in interest rates only, and not those arising on account of the impact of idiosyncratic factors. The index is available from January 1, 1997 to the present. The index would provide a benchmark for portfolio management by various investment managers and gilt funds. It could also form the basis for designing index funds and for derivative products such as options and futures.
Salient features of the Index:
- The base date for the index is 1st January 1997 and the base date index value is 100
- The index is calculated on a daily basis from 1st January 1997 onwards; weekends and holidays are ignored.
- The index uses all Government of India bonds issued after April 1992. These were issued on the basis of an auction mechanism that imparted some amount of market-relatedness to their pricing. Bonds issued prior to 1992 were on the basis of administered interest rates.
- Each day, the prices for all these bonds are estimated off the NSE Benchmark-ZCYC for the day.
- The constituents are weighted by their market capitalisation.
- Computations are based on arithmetic and not geometric calculations.
- The index uses a chain-link methodology i.e. today's values are based on the previous value times the change since the previous calculations. This gives the index the ability to add new issues and also remove old issues when redeemed.
- Coupons and redemption payments are assumed to be re-invested back into the index in proportion to the constituent weights.
- Both the Total Returns Index and the Principal Returns Index are computed.
- The indices provided are: Composite, 1-3, 3-8, 8+ years, TB index, GS index
More details available in the Technical Paper
NSE G-Sec Index for the day