CRISIL Indices Annual Criteria Review - 2017

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CRISIL Indices – Annual Criteria Review - 2017

CRISIL Funds and Fixed Income Research

March 2017

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Background

CRISIL presently maintains 45 standard indices that track various aspects of fixed income markets in India. CRISIL Indices are used as performance benchmarks by asset managers including mutual funds, insurance companies, wealth advisors, banks and corporate entities.

In our endeavour to keep the indices representative and replicable, we do an annual review of criteria for index construction and have completed the review for 2017. As a part of this exercise, the following enhancements will be incorporated with effect from 03 April 2017:

1. Review of weights to the sub-indices of the CRISIL composite indices. Please refer to section 1 below for details on existing and new weights.

2. Introduction of “CRISIL Ultra Short Term Debt Index”. Please refer to section 2 below for details on the same.

3. Change in Criteria - 2 month & 3 month CP Indices

With the introduction of this new index, the number of standard CRISIL indices increases to 46 from the existing 45.

A list of all standard CRISIL indices is provided in annexure.

For more details on these indices, kindly visit the below web-link http://www.crisil.com/capital-markets/indices.html

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1. Review of weights to the sub-indices to the CRISIL composite indices

Broad Level Asset Allocation

The asset-allocation of the indices is reviewed on an annual basis and is based on average of polls received from market participants. The table below summarises the existing and the new asset allocations that shall be effective from April 03, 2017

Composite indices Assets Existing

weights New weights#

CRISIL Composite Bond Fund Index

Government Securities 50% 45%

Long Term Corporate Bonds 25% 25%

Medium Term Corporate Bonds 15% 20%

Short Term Corporate bonds 10% 10%

CRISIL Short Term Bond Fund Index

Government Securities 20% 20%

Short Term Corporate Bonds 45% 45%

CDs (across maturities) 20% 20%

CPs (across maturities) 15% 15%

CRISIL Liquid Fund Index

CDs (2 month & 3 month) 50% 45%

CPs (2 month & 3 month) 35% 40%

CBLO 15% 15%

CRISIL Ultra Short Term Debt Index*

6 month CDs - 25%

1 Year CDs - 20%

6 month CPs - 20%

1 Year CPs - 15%

Short Term Corporate Bonds - 20%

#New weights are based on average of polls rounded off to nearest multiple of 5

*CRISIL Ultra Short Term Debt Index will be launched on 03 Apr 2017

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Weights to Sub-Indices

Weights to sub-indices within each asset are based on historical issuance pattern. The table below summarises the existing and the new weights that shall be effective from April 03, 2017

Index Sub- Index

Asset Weights (Existing)

Sub-indices Weights (Existing)

Asset Weights

(New)

Sub-indices weights

(New) (2016-17)* (2016-17)^$ (2017-18)* (2017-18)^$

CRISIL Composite Bond Fund Index

CRISIL Gilt Index 50% 50% 45% 45%

CRISIL AAA Long Term Bond Index^@

25% 20%

CRISIL AA Long Term Bond Index^@ 5% 5%

CRISIL AAA Medium Term Bond Index^@

15% 12%

20% 16%

CRISIL AA Medium Term Bond Index^@ 3% 4%

CRISIL AAA Short Term Bond Index⁺

10% 6%

CRISIL AA Short Term Bond Index⁺ 4% 4%

CRISIL Short Term Bond Fund Index

CRISIL Gilt Index 20% 20% 20% 20%

45% 25%

45% 26%

CRISIL AA Short Term Bond Index⁺ 20% 19%

CRISIL Composite CD Index⁺ 20% 20% 20% 20%

CRISIL Composite CP Index⁺ 15% 15% 15% 15%

CRISIL Liquid Fund Index

CRISIL CBLO Index 15% 15% 15% 15%

CRISIL 3 Month CD Index^

50% 18%

45% 27%

CRISIL 2 Month CD Index^ 32% 18%

CRISIL 3 Month CP Index^

35% 13%

40% 23%

CRISIL 2 Month CP Index^ 22% 17%

CRISIL Composite CD Index

CRISIL 2 Month CD Index⁺

100%

48%

100%

27%

CRISIL 3 Month CD Index⁺ 31% 44%

CRISIL 6 Month CD Index⁺ 2% 5%

CRISIL 1 Year CD Index⁺ 19% 24%

CRISIL Composite CP Index

CRISIL 2 Month CP Index⁺

100%

58%

100%

38%

CRISIL 3 Month CP Index⁺ 35% 52%

CRISIL 6 Month CP Index⁺ 2% 2%

CRISIL 1 Year CP Index⁺ 5% 8%

CRISIL Ultra Short Term Debt Index

- -

20%

11%

CRISIL AA Short Term Bond Index⁺ - 9%

CRISIL 6 Month CD Index

- - 25% 25%

CRISIL 1 Year CD Index - 20% 20%

CRISIL 6 Month CP Index

- - 20% 20%

CRISIL 1 Year CP Index - 15% 15%

$ Rounded off to nearest integer

*Asset weights as obtained from the table above

@ New weights are based on issuances during the calendar year 2015 and 2016 with 40% weight to earlier and 60% weight to latter

+ New weights are based on issuances during the calendar year 2016

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2. Introduction of “CRISIL Ultra Short Term Debt Index”

We will launch CRISIL Ultra Short Term Debt Index that seeks to track the performance of ultra-short term debt portfolio comprising of short term AAA/AA rated bonds and 6 month and 1 year CPs and CDs

Features

● Total Return Index seeking to capture coupon and price returns of the underlying portfolio

● Base date for the Index : September 30, 2010

● Index portfolio marked-to-market on a daily basis using CRISIL security level valuations

● Index is fully invested at all points of time with no cash component

● Derived index from the following sub-indices

− CRISIL 6 Month CD Index

− CRISIL 1 Year CD Index

− CRISIL 6 Month CP Index

− CRISIL 1 Year CP Index

− CRISIL AA Short Term Bond Index

− CRISIL AAA Short Term Bond Index

3. Change in Criteria - 2 month & 3 month CP Indices

CRISIL presently maintains the following four CP Indices:

● CRISIL 2 Month CP Index

● CRISIL 1 Year CP Index

They are constructed based on indicative yields of A1+ rated benchmark CPs (of appropriate residual maturities based on the index) sourced from CRISIL CPNPR Matrix.

In order to improve the representativeness and replicability of the indices

,

CRISIL 2 Month CP Index and CRISIL 3 Month CP Index will be made constituent based as compared to an indicative yield approach from 3rd April 2017.

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− Maximum of 10 issuers shall be identified

− For each of the shortlisted issuers, the security with a higher residual maturity will be selected to be a part of the index

● In case the number of securities shortlisted using primary issuance data above falls short of 10:

− Remaining issuers will be identified based on the traded data for the previous fortnight

− Issuers shall be shortlisted based on the traded volume size

− For each of the shortlisted issuers, the security with a higher traded volume will be selected

− In case of multiple securities having same traded volume, the security with a higher residual maturity will be selected to be a part of the index

● In case the number of securities shortlisted using primary issuance and secondary trades data above falls short of 10:

− Remaining issuers will be identified based on the CP holdings by various entities

− Issuers shall be shortlisted based on higher residual maturity

● In case the number of securities shortlisted using primary issuance, secondary trades and holdings data above falls short of 10:

− Remaining issuers will be identified from the existing portfolio with a residual maturity of -7 days from the respective tenor

− Issuers shall be shortlisted based on higher residual maturity

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ANNEXURE

List of standard CRISIL Indices:

Sr.

No.

Index Objective Inception

date Composite Indices

1 CRISIL Composite Bond Fund Index

To track the performance of a debt portfolio that includes government securities and AAA/AA rated corporate bonds

March 31, 2002 2 CRISIL Short Term Bond

Fund Index

To track the performance of a debt portfolio that includes government securities, AAA/AA rated corporate bonds, CPs and CDs.

March 31, 2002 3 CRISIL Liquid Fund Index To track the performance of a debt portfolio that includes CBLO, CPs and

CDs.

March 31, 2002 4 CRISIL Ultra Short Term Debt

Index

To track the performance of ultra-short term debt portfolio comprising of short term AAA/AA rated bonds, CPs and CDs.

September 30, 2010

Gilt Indices

5 CRISIL Gilt Index To track the performance of a portfolio comprising government securities, across maturities

January 01, 1997 6 CRISIL Short Term Gilt Index To track the performance of a portfolio of government securities with

residual maturity up to five years

October 01, 2004 7 CRISIL Medium Term Gilt

Index

To track the performance of a portfolio of government securities with residual maturity greater than five and up to ten years

October 01, 2004 8 CRISIL Long Term Gilt Index To track the performance of a portfolio of government securities with

residual maturity greater than ten years

October 01, 2004 9 CRISIL 10 Year Gilt Index CRISIL 10 Year Gilt Index seeks to track the performance of the 10 year

benchmark government security

September 01, 2001

10 CRISIL Inflation Indexed Government Securities Index

CRISIL IIGS Index seeks to track the performance of inflation indexed government securities across maturities

June 04, 2013

Credit Indices

11 CRISIL AAA Long Term Bond Index

To track the performance of a long-term debt portfolio consisting of AAA rated corporate bonds with residual maturity greater than five years

March 31, 2002 12 CRISIL AAA Medium Term

Bond Index

To track the performance of a medium-term debt portfolio consisting of AAA rated corporate bonds with residual maturity greater than three and up to five years

March 31, 2002

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Sr.

No.

date 18 CRISIL A Short Term Bond

Index

To track the performance of a short-term debt portfolio consisting of A rated corporate bonds with residual maturity up to three years

March 31, 2002 Hybrid Indices

19 CRISIL Balanced Fund – Aggressive Index

To track the performance of an equity-oriented hybrid portfolio having a blend of the Nifty 50 Index (65%) and CRISIL Composite Bond Fund Index (35%)

March 31, 2002 20 CRISIL Balanced Fund –

Moderate Index

March 31, 2002 21 CRISIL Balanced Fund –

Conservative Index

March 31, 2002 22 CRISIL MIP Blended Fund

Index

To track the performance of a debt-oriented hybrid portfolio having a blend of the Nifty 50 Index (15%) and CRISIL Composite Bond Fund Index (85%)

March 31, 2002 23 CRISIL Debt Hybrid 75+25

Fund Index

To track the performance of a debt-oriented hybrid portfolio having a blend of the Nifty 50 Index (25%) and CRISIL Short Term Bond Fund Index (75%)

March 31, 2006 24 CRISIL Debt Hybrid 60+40

Fund Index

To track the performance of a debt-oriented hybrid portfolio having a blend of the Nifty 50 Index (40%) and CRISIL Short Term Bond Fund Index (60%)

March 31, 2006 Money Market Indices

25 CRISIL 2 Month CD Index To track the performance of a portfolio of CDs with residual maturity

around 2 months July 03, 2012

26 CRISIL 3 Month CD Index To track the performance of a portfolio of CDs with residual maturity around 3 months

September 30, 2010

27 CRISIL 6 Month CD Index To track the performance of a portfolio of CDs with residual maturity around 6 months

September 30, 2010

28 CRISIL 1 Year CD Index To track the performance of a portfolio of CDs with residual maturity around 1 year

September 30, 2010

29 CRISIL Composite CD Index To track the performance of a portfolio of CDs across maturities September 30, 2010

30 CRISIL 2 Month CP Index To track the performance of 2 month A1+ rated CP July 03, 2012 31 CRISIL 3 Month CP Index To track the performance of 3 month A1+ rated CP April 30, 2007 32 CRISIL 6 Month CP Index To track the performance of 6 month A1+ rated CP April 30, 2007 33 CRISIL 1 Year CP Index To track the performance of 1 year A1+ rated CP April 30, 2007 34 CRISIL Composite CP Index To track the performance of A1+ rated CPs across maturities April 30, 2007 35 CRISIL 91 Day T-bill Index To track the performance of the 'on-the-run' 91 Day T-Bill January 01,

1995

36 CRISIL 182 day T-Bill Index To track the performance of the „on-the-run‟ 182 Day T-Bill April 08, 2005 37 CRISIL 1 Year T-bill Index To track the performance of the 'on-the-run' 1 Year T-Bill January 01,

1995 38 CRISIL Composite T-Bill

Index To track the performance of T-Bills across maturities April 08, 2005

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Sr.

No.

date

Dollar Denominated Indices

39 CRISIL Composite Bond Fund Dollar Index

To track the performance of CRISIL Composite Bond Fund Index (CRISIL Compbex) converted in USD denomination

March 31, 2002 40 CRISIL Short Term Bond

Fund Dollar Index

To track the performance of CRISIL Short Term Bond Fund Index (CRISIL Stbex) converted in USD denomination

March 31, 2002 41 CRISIL Liquid Fund Dollar

Index

To track the performance of CRISIL Liquid Fund Index (CRISIL Liquifex) converted in USD denomination

March 31, 2002 42 CRISIL 91 Day T-Bill Dollar

Index

To track the performance of CRISIL 91 Day T-Bill Index converted in USD denomination

August 25, 1998 43 CRISIL 1 Year T-Bill Dollar

Index

To track the performance of CRISIL 1 Year T-Bill Index converted in USD denomination

August 25, 1998 44 CRISIL 10 Year Gilt Dollar

Index

To track the performance of CRISIL 10 Year Gilt Index converted in USD denomination

September 01, 2001

45 CRISIL Gilt Dollar Index To track the performance of CRISIL Gilt Index converted in USD denomination

August 25, 1998 Commodity Indices

46 CRISIL Gold Index To track the performance of gold in the domestic market and is based on landed price of gold in Mumbai.

January 02, 2007

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