India Index Services & Products Limited (IISL), a subsidiary of the National Stock Exchange of India, has launched a series of six AAA-rated corporate bond indices tracking the local Indian market.
The NIFTY AAA Corporate Bond Index series comprises five indices across different maturities and one composite index.
The indices may be used by asset managers seeking a benchmark that measures the risk-return dynamics of the Indian corporate bond market, as well as serving as reference indices to be tracked by future investment products such as ETFs.
The NIFTY AAA Corporate Bond Index series comprises five indices across different maturities and one composite index. Each of the five maturity-based indices represents the performance of liquid corporate bonds falling into specific residual maturity buckets. The composite index covers all five distinct maturity buckets, representing the dynamics of the entire AAA corporate yield curve.
The NIFTY AAA corporate bond index series includes the following specific indices:
NIFTY AAA Ultra Short-Term Corporate Bond Index 0.5 to 2 Years Index
NIFTY AAA Short-Term Corporate Bond Index 2 to 3 Years Index
NIFTY AAA Medium-Term Corporate Bond Index 3 to 5 Years Index
NIFTY AAA Long-Term Corporate Bond Index 5 to 10 Years Index
NIFTY AAA Ultra Long-Term Corporate Bond Index >10 Years Index
NIFTY AAA Corporate Bond Index All maturities Index
The composite NIFTY AAA Corporate Bond Index All maturities Index consists of up to 70 AAA-rated bonds that represent five distinct maturity buckets with up to 14 distinct issuers within each maturity bucket. Issuers are selected based on a composite liquidity score derived from aggregate trading value (80% value assigned), number of days traded (10%) and number of trades of all the eligible bonds of issuers during the previous quarter (10%). For every selected issuer within a maturity bucket, the most liquid bond during the previous one month forms part of the index.
Weights to selected bonds are assigned based on a composite liquidity score with the weight of any issuer capped at 10%.
Mukesh Agarwal, CEO of IISL, commented: “The index construction methodology pays specific attention to maintaining high portfolio liquidity, lower portfolio turnover and better market coverage. Given the illiquid nature of the Indian corporate bond market, this unique mix of index attributes is expected to make them the most suitable benchmark indices.”
The indices will be calculated on an end-of-day basis, and compositions will be reviewed quarterly.