BSE PSU

What is the BSE PSU index?

The BSE PSU index is a sectoral index managed by the Bombay Stock Exchange (BSE), specifically designed to track the performance of the leading Public Sector Undertakings (PSUs) listed on the BSE. PSUs are companies in which the government holds a significant stake, often exceeding 51%, and these entities play a crucial role in India’s economic development across diverse sectors such as banking, energy, infrastructure, engineering, mining, and transportation.

The BSE PSU Index provides a comprehensive snapshot of the price movements and performance of top government-owned companies, serving as a benchmark for investors, analysts, and policymakers interested in the public sector’s contribution to the Indian equity market. The index was created to highlight the growing importance and market capitalisation of PSUs in India’s financial landscape. It is commonly used for benchmarking the performance of PSU-focused mutual funds and exchange-traded funds (ETFs), as well as for tracking the broader sentiment towards government-owned enterprises.

The index is reviewed and rebalanced semi-annually to ensure it remains representative and relevant as the PSU landscape evolves, reflecting changes in government policy, disinvestment strategies, and sectoral reforms. Monitoring the BSE PSU index gives investors valuable insight into the performance, strengths, and challenges of India’s key public sector companies, which often serve as barometers of the nation’s economic direction and policy priorities.

BSE PSU index stocks selection criteria

The selection criteria for the BSE PSU index are rigorous and transparent, ensuring that only the most significant and investable government-owned companies are included. The initial universe consists of all listed companies classified as Public Sector Undertakings (PSUs) on the BSE. To be eligible, a company must have a minimum of 51% government ownership, either by the central or state government, directly or indirectly. The next filter is market capitalisation, with only the top PSUs by free-float market capitalisation being considered for inclusion.

Liquidity is another major parameter; only those stocks with sufficient trading volumes and frequency over a defined period are selected, ensuring the index remains investable and truly reflects market activity. The index also aims to represent a broad cross-section of the public sector, including companies from banking, oil & gas, power, infrastructure, mining, and engineering sectors. Compliance with regulatory norms, minimum public shareholding criteria, and sound corporate governance practices is mandatory for all constituents.

The composition of the index is reviewed and rebalanced semi-annually, during which companies may be added or removed based on changes in government holding, market capitalisation, trading activity, or sectoral representation. This selection methodology ensures that the BSE PSU index serves as a credible and dynamic benchmark for tracking the government’s footprint in the Indian equity market, adapting to changes in government disinvestment, sectoral reforms, and capital market trends.

How is the BSE PSU index calculated?

The BSE PSU index is calculated using the free-float market capitalisation-weighted methodology, in line with global best practices for equity indices. Under this approach, each constituent company’s weight in the index is proportionate to its free-float market capitalisation, which is determined by multiplying the current share price by the number of shares available for public trading (excluding government holdings, promoters, and other locked-in shares). The index value is computed as:

(Sum of free-float market capitalisation of all constituent PSUs / Index divisor) × Base value

The base year for the BSE PSU index is 1998-99, and the base value was set at 1,000 points. The index divisor is a key figure that is adjusted periodically to account for corporate actions such as stock splits, bonus issues, rights issues, and changes in the list of constituents, ensuring continuity and consistency in the index value over time. The index is reviewed and rebalanced semi-annually to reflect the latest market developments, company performance, and changes in government shareholding.