SBI global index to give deeper bond insight

State Bank of India (SBI) launched a global bond index for foreign investors along with FTSE Russel, the global index and data providers to provide global investors a new tool to analyse India’s bond market.

Debt index will provide a statistical measurement of the debt prices in that portfolio, and help foreign investors to benchmark their returns from their investments against a benchmark. The FTSE SBI index series is a set of benchmarks Indian Sovereign Bond Fixed Income markets. Government bonds of varying maturities will form part of the index.

Venkat C Nageswar, deputy managing director (global markets), SBI, said, "The Index Series is designed to reflect the performance of Indian fixed income securities issued in Indian Rupees (INR), in India, by the Indian Government. The index series consists of the following index family - FTSE SBI Indian Government Bond Index. Sub-indexes will be based on the term to maturity.”

In order to be eligible for the FTSE SBI Bond Index, bonds must meet the criteria such as the minimum size should be Rs 5,000 crore as of the rebalance date, bonds with fixed coupons as well as original issue zero coupon bonds.

“The main advantages of the Index are FTSE SBI Index would provide global investors an easy way to track the overall health of the Indian economy as well as act as a key benchmark for Indian debt for foreign investors looking to invest in Indian debt market. The historical data of index movements and prices can provide some guidance to investors as to how the markets have reacted to certain situations in the past and allow investors to make better investment decisions.”

“FTSE SBI Index will allow Asset Management Companies to launch Exchange Traded Funds (ETF). The ETFs would follow either the master Index or the sub-indexes as closely as possible. Through an index ETF, investors would get exposure to a large number of Government securities in a single transaction,” Nageswar added.

ETF products attempt to replicate the indices, so as to provide returns that closely correspond to the total returns of the securities represented in the index. The Portfolio Manager of the ETF has to ensure that there is low tracking error,the difference between the returns of the ETF and the target index.

GAUGING PERFORMANCE

• Debt index will provide a statistical measurement of the debt prices in portfolio
   
• The minimum size of the bonds should be Rs 5,000 crore