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FSM All-Equity Fund Index (India) Methodology August 28, 2009
A detailed look at the index calculation methodolology
Author : iFAST Research Team


Untitled Document

   

        1. Index Constituents Selection Criteria

A fund must satisfy the following four criteria to be a constituent of the FEFI

  1. Is an open-ended equity fund
  2. Has a Growth option
  3. Has daily NAV pricing available
  4. Is available for sale on FSM Platform

        2. Returns

We equal-weight the index so that each fund in the index contributes equally to the overall index return. The index is not AUM  weighted, meaning that returns for a fund with a smaller AUM will have the same impact on the index as another fund with a larger AUM. The index return thus reflects the mean return of the underlying funds on an equally-weighted basis. The FEFI will be calculated in INR terms, i.e., the NAV of all the funds will be in INR.

Formula

# Returns of consitutent funds since the index inception date of 31 December 2008; they are calculated on NAV-to-NAV basis

        3. Index Level & Inception Date

The index is calculated on a daily basis and is computed on all trading days. For a particular day, if more than 80% of funds in the index do not have Net Asset Value (NAV), the index will not be computed for that particular date. The index was incepted at 1,000 points on 31 December 2008.

Only Open Ended Equity funds with Growth Option are included in the index; dividend and dividend reinvestment options of a fund are not selected, as considering dividend and dividend reinvestment options led to duplication and distortion of the index values.

         4. Index review

The 1st review of the FEFI will happen on 31st December 2009, with subsequent review periods occurring semi-annually, i.e., 30th June and 31st December every year. If 30th June or 31st December are non-working days, the indices will be reviewed on the next working day.

        5. Dealing with New Fund Addition (and Removal of Old / Liquidation)

The index is reviewed twice a year (30th June and 31st December) to incorporate funds that have been added to the platform. New funds on the FSM platform will be included in the index only on these two dates. The availability of daily NAV is the key criterion for the inclusion of a fund’s returns in the index. While the index covers open-ended funds, funds may cease subscription for a variety of reasons. Where the daily NAV is provided, the fund’s returns will still be incorporated into the index.

A fund which is not open for subscription but still provides daily NAV will only be removed from the index on the review date (i.e., 30th June and 31st December). If a fund is liquidated or merged with another fund, daily NAV ceases and thus a liquidated or a merged fund will not contribute to the index’s returns.

        5. Component funds in the FSM All-Equity Fund Index (IN) as at 31 December 2008

There are 79 component funds in the FSM All-Equity Fund Index (IN) as at 31 December 2008.


iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual funds of any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or be materially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any mutual fund. No investment decision should be taken without first viewing a mutual fund's offer document/scheme additional information/scheme information document. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, and legal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative of the future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. Please read our disclaimer in the website.

 


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