BSE 500 Enhanced Value 50 Index

BSE 500 Enhanced Value 50 Index comprises a basket of 50 stocks with the highest value scores selected from the universe of the BSE 500 Index. Since value scores are not influenced by industry or market cap, this index includes stocks of various market capitalisations drawn from a diverse range of industries. So, any index fund or exchange traded fund (ETF) that tracks this index will feature a diversified portfolio of 50 stocks drawn from various industries and market capitalisations.

The BSE 500 Enhanced Value 50 Index undergoes reconstitution once a quarter in the months of March, June, September and December. At these quarterly intervals, new stocks may be included at the expense of existing stocks that were previously part of the index. The value score of each constituent stock in this index is calculated using 3 key financial ratios – Book to price ratio, Earnings to Price ratio and Sales to price ratio. Let’s take a closer look at the stock selection methodology of the BSE 500 Enhanced Value 50 Index.

The BSE 500 Index serves as the stock universe for the BSE 500 Enhanced Value 50 Index. So any company that is not part of this universe is automatically disqualified. This initial list of 500 stocks is further reduced based on a liquidity check for each stock. This is done on the basis of parameters such as trade value, average daily turnover and trading history of the stock during the applicable reference period. The details of these criteria along with stock selection methodology is freely available for viewing and download from the Asia Indices website of BSE.

Traditionally, value investors have used a variety of financial ratios to identify potentially under value companies to invest in. The BSE 500 Enhanced Value 50 Index uses 3 such popular financial ratios - Book-to-Price ratio, Earnings-to-Price ratio, and Sales-to-Price ratio to identify undervalued stocks from the BSE 500 Index that are suitable for inclusion into the index.

The book value of a company is calculated as total assets of a company less liabilities. This represents the company's net asset value (NAV) and it serves as an indicator of the intrinsic value of the stock. On the other hand, the company’s market value is the price that is currently assigned by the equity market to the company. The formula to calculate this ratio is:

Book to Price Ratio = (Book Value per Share / Market Value per Share)

A high book-to-price ratio shows that the book value of the stock is higher than the market value. This potentially indicates that the company is undervalued with respects to the assets that are at its disposal.

Earnings per share (EPS) of a company are representative of its profitability, so the more profitable a company is, the higher its EPS will be, other things being equal. Price per share on the other hand is typically assigned by the equity market based on how the company is perceived by the broader market. The formula to calculate earnings to price ratio is this:

Earnings to Price Ratio = (Earnings per Share / Market Price per Share)

A stock that has a high earnings to price ratio indicates that the company is profitable however, its stock price is low in comparison. This can indicate undervaluation of the stock by equity markets and can be perceived as an opportunity to pick a high quality investment at a low price.

The sales to price ratio measures a company's sales on a per share basis to its market price per shares. In this context, a high sales per share value indicates that the company is able to generate a large amount of revenue on a per share basis, which is indicative of potentially high revenue generation by the company. The formula to calculate sales to price ratio is below:

Sales to Price Ratio = (Sales per share / Market Price per Share)

A higher ratio indicates that the company is making higher sales compared to the market price determined by the equity market. In other words, the company might be considered as undervalued in the market when evaluated on the basis of its revenue potential

These 3 ratios are subsequently used to determine the value score of eligible stocks selected from the BSE 500 Index. The top 50 stocks with the highest value score are selected as part of the BSE 500 Enhanced Value 50 Index.

The BSE 500 Enhanced Value 50 Index features companies across various sectors and market caps. This diversification ensures that the underperformance or outperformance of any single sector or stock does not disproportionately impact the performance of the index as a whole.  The below table shows the weights of the top 10 companies featured on the BSE 500 Enhanced Value 50 index as of 30 June, 2025:

As you can see among the top 10 companies in the BSE 500 Enhanced Value 50 Index, the energy sector is featured prominently along with metals, financial and consumer discretionary. But these are not the only sectors that this index provides exposure to. The below table shows the top 5 sectors and their individual weight on the index as of 30 June, 2025:

As you can see, the top 5 sectors featured on this index includes a number of key sectors such as financial services, energy, commodities, etc. A value strategy that identifies potentially undervalued stocks in these segments definitely has the potential to provide high long term returns to those who invest in index funds or exchange traded funds that mirror this index.

The BSE 500 Enhanced Value 50 Index has shown strong performance by offering positive investment returns across the medium to long term. The below table shows the total index returns of the index over the various time periods as of 30 June, 2025.

Note:In the above returns table 1 year returns are absolute returns while 3 years, 5 years, and returns since inception data are CAGR returns as of 30th June 2025.

Currently there is no direct method to invest in the BSE 500 Enhanced Value 50 Index. However, you can directly purchase constituent shares of the index in the same proportion as their weightage on the index. However, this method of directly stocks would require regular monitoring and periodic rebalancing making it time consuming and potentially expensive as well.

However, there are ways to invest in this index that can allow you to reap the benefits of value investing such as potentially high long term returns with minimal effort:

Option 1: Invest via Index Funds

Index funds are designed to replicate the structure and performance of their chosen index within acceptable margins of tracking error. An index fund that mirrors the BSE 500 Enhanced Value 50 Index is the Axis Max Life BSE 500 Value 50 Index Fund. This index fund is available to Axis Max Life policyholders through various unit linked insurance plans such as the Axis Max Life Flexi Wealth Advantage Plan. By investing in these Axis Max Life ULIP plans you can achieve exposure to all 50 companies featured on the index in a cost-effective manner and also get the benefit of life cover that is in-built into these plans.

Option 2: Invest via Exchange Traded Funds

The units of Exchange Traded funds (ETFs) can be bought and sold on stock exchanges in real time. ETFs are similar to index funds as these too replicate their chosen index and the stocks of the index are the underlying assets of the ETF. However, the NAV of ETFs changes in real-time and this investment option supports intra-day trading strategies unlike index funds. The main drawback of ETFs is that a demat account and a brokerage account are mandatory for making index investments via this route.

Both of these options represent a passive management approach to value investing. While traditionally value investing has involved active stock picking, the historical data clearly shows that a passive approach to value investing based on indices like the BSE 500 Enhanced Value 50 Index does have the potential to generate substantial long-term returns for the investor. What’s more this approach can also reduce the time and effort required by the investor to identify undervalued stocks, while the elimination of fund manager bias and transparent stock selection methodologies are an added bonus to consider.

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