S&P BSE Oil&Gas

What is BSE Oil & Gas?

If there is one sector that can create the fear of recession overnight, it is the Oil & Gas sector. These are the most widely used fuels to produce energy and power the factories and our vehicles. Transportation around the globe is almost completely dependent on the Oil & Gas industry. 

As of 2022, the value of this sector is almost USD 5 trillion. As a result, the impact of the Oil & Gas sector is huge. So, it is important to study its effects on the movement of the stock markets. Hence, the BSE launched the S&P BSE Oil & Gas Index in August 2004 as a spin-off of the BSE 500 index.

The BSE Oil & Gas index includes the top stocks that belong to the Oil & Gas sector and also form a part of the BSE 500 index. The constituents of this index account for almost 90% of the total market capitalization of all the stocks from the Oil & Gas sector. The BSE Oil & Gas index is valued on a real-time basis in both INR & USD.

The constituents in the BSE Oil & Gas index are ranked based on the free-float market capitalization method, but the BSE Oil & Gas Share Price is calculated using the modified market cap weighted method. It simply means a cap on the maximum weightage one stock can hold on the index.

The rebalancing of the index’s constituents is carried out semiannually in June & December every year. Presently, there are 10 constituents in S&P BSE Oil & Gas. By studying the movements of this sector, analysts can predict the future trends of the stock markets and the economy.

How is BSE Oil & Gas Calculated?

Since the constituents of the index are picked from BSE 500, the same criteria also apply to the stocks listed in BSE Oil & Gas. Here are the requirements that need to be fulfilled by the constituents:

• The constituents should be a part of the BSE All Cap index for at least 6 months
• The stocks should be actively traded during at least 80% of the sessions in the last 6 months
• The companies should have an Average Traded Value of at least INR 1 billion

While the stocks in the BSE Oil & Gas index are selected from BSE 500 based on the highest market cap, the index uses a modified weightage method to ensure that the impact of one stock on the BSE Oil & Gas index is limited. So, here are the weightage rules for calculating the BSE Oil & Gas Share Price:

• The maximum weightage that a constituent can hold in the index is capped at 20%
• If the weightage of a constituent is above 20%, the excess weight is reduced from that constituent and added to the rest of the constituents.

For Ex: Companies X & Y have a free-float market cap of INR 24 Crores and 25 Crores, respectively. Assuming their weightage in BSE Oil & Gas to be 24% & 25%, respectively, here’s how modified weightage will work.

This method is called modified weight because it modifies the maximum weight of a constituent by dividing it among the remaining constituents on a proportional basis. Of all the sector indices, this method is used only for the BSE Bankex and BSE Oil & Gas Index.