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The new index series from FTSE and the IDFC will contain one benchmark and one tradable index. In addition to giving investors calculations in real time, the two new products will also be calculated on an end of day basis.
Of the two indices, the FTSE IDFC India Infrastructure Index will be offered to investors as a benchmark index and will cover virtually every listed Indian infrastructure firm and sub-sectors. This benchmark index comprises of 65 stocks and has a current market capitalisation of approximately $50 billion. It also includes firms from the fixed line telecommunications, mobile communications, electricity, electrical components and equipment and heavy construction sub-sectors.
The second, the FTSE IDFC India Infrastructure 30 Index, will be more specific than its series cousin. Although the same sub-sectors will be represented as in the FTSE IDFC India Index, the market cap of this tradable index will be significantly lower, coming in at around $32.5 billion upon launch.
According to the two partners, the company weightings of the FTSE IDFC India Infrastructure 30 Index will be spread amongst names like Reliance Communications, Bharti Airtel, Bharat Heavy Electricals and National Thermal Power Corporation (NTPC), which each have a 10% weighting.
The launch of the new index series in India comes as the infrastructure asset class is gaining increased recognition among investors globally. Aside from a strong record of market index out-performance, both FTSE and the IDFC note the global trend towards public/private partnerships and privatisation of traditionally publicly funded assets driving rapid growth of infrastructure, of which India is a prime example.
The first India infrastructure index will likely serve as a catalyst for the creation of structured products, index tracking funds and exchange-traded funds (ETFs).
Work has already begun on creating several structured products based on the index series, with Citi receiving first rights to manufacture structured solutions benchmarked to the indices, which may include certain risk-adjusted and principal protected products. Citi also has the rights to develop institutional products based on the indices, which it plans to pursue.
The latest series launch by FTSE follows what has been an extremely active year for the UK-based indexer. Thus far in 2007, the firm has launched a new series of indexes in Singapore and Malaysia. In addition, FTSE and Citi launched the FTSE Vietnam Accessible Index, the first country index specifically designed for foreign institutional investors.
For IDFC, this markets the first time that the Indian infrastructure specialist has entered into the indexing world. The firm is typically known for its financing projects in India and is now the single largest debt and equity financer of privately sponsored infrastructure in the nation, with a balance sheet over $4.3 billion.
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