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Advantages of SPIcE
• Diversification: Instant exposure to a diversified
portfolio that replicates SENSEX
• Trading Flexibility: Bought/ sold at any time
during the trading day just like any other listed
share - a tremendous advantage over an Index
fund where entry & exit is allowed only at the end
of day’s NAV
• Pricing: Real-time market price of SPIcE available
which will closely track SENSEX value
SENSEX
• Oldest and most widely followed benchmark of
Indian Capital Markets
• Historical Data available since 1978-79
• Composed of 30 stocks from 13 different sectors of
the Indian Economy
• Represents 43% of total market capitalization and
45% of total volume
• 7 Index Funds currently running on SENSEX with
assets under management of over Rs. 300 crores
Post-IPO Scenario
• Post-IPO, SPIcE will have two markets:
– Primary Market – where SPIcE can be created
and redeemed directly with the Fund
– Secondary Market – where SPIcE units can be
traded on a stock exchange
• LONG-TERM VIEW
• For longer-term investors, ETFs are better suited
than futures.
– For implementing longer-term strategies,
futures contracts must be rolled over (every 3
months or 1 month in case of illiquidity in far
month contracts) because of expiration, which
leads to higher trading costs and tracking
error.
• Investor is also subject to mispricing of calendar
spread
• OPERATIONAL EASE
• Investors prefer the relative operational ease of
trading stock as opposed to trading futures, which
require that the investor open a futures account
and ensure mark to market daily.
• ARBITRAGE
• ETFs provide better arbitrage opportunities as both
ETFs and underlying stocks trade in the same
market (Cash Segment).
• Arbitrage between index futures and basket stocks,
though possible, is cumbersome as it involves
trading in two different markets- Cash Segment and
Derivatives Segment.
• This linkage becomes critical in extreme market
conditions.