What is Dollex and how it is Different From Sensex

To understand the Dollex, let us take a hypothetical situation. Assume that the Sensex was at 40,000 in January and has now grown to 50,000 in December. That is a phenomenal 25% appreciation in the Sensex and if you are an Indian investor you would be extremely happy. However, if you are a foreign portfolio investor or FPI, you also worry about the rupee/dollar exchange rate. That is because, for the foreign investor to realize the 25% gains on the Nifty, the rupee must have remained stable. However, if during this period the rupee had depreciated by 15% from Rs.70/$ to Rs.80.50/$, then the returns of the foreign investor would have been substantially lower. This currency impact is captured by the Dollex.

Now let us use this example to understand what is Dollex? The Dollex captures these dollar-adjusted returns. Let us break up the above illustration. In the above case, Sensex returns would be 25% {(50,000-40,000) / 40,000}. That is quite straight forward and that is the returns that your Sensex would show. Here is how Dollex would be calculated. Dollar infusion in January = 40,000/70 = $571.43. At the time of redemption, it is 50,000/80.50 =$621.12. In this case, the Dollex Returns would be 621.12/571.43 = 8.7%. That is a tad shocking. How did 25% returns become just 8.7%? That is because during this interim period, the rupee had depreciated by 15% resulting in the dollar returns reducing substantially. This dollar impact is captured by the Dollex. We shall look at the S&P BSE Dollex 30 in greater detail.

What is Dollex

The S&P BSE Dollex 30 is the US dollar version of the S&P BSE SENSEX. The Sensex is already India's most tracked bellwether index and is considered to be a barometer of the Indian markets due to its depth and breadth. The S&P BSE Dollex 30 captures the dollar-adjusted returns in the sense that it also factors the dollar movements. In short, if the rupee depreciates against the dollar then the returns on the S&P BSE Dollex 30 will be lower than the Sensex. On the other hand, if the rupee appreciates against the dollar then the returns on the S&P BSE Dollex 30 will be higher than on the Sensex. The S&P BSE Dollex 30 is designed to measure the performance of the 30 largest, most liquid, and financially sound companies across key sectors of the Indian economy that are listed at BSE Ltd. The only difference is that unlike the Sensex, which is a rupee index, the Dollex is a dollar index.

The S&P BSE Dollex 30 index continuously adjusted for exchange rate movements between the dollar and rupee. Normally, the RBI reference rate is used as the yardstick for gauging such rupee movements. The constituents remain the same and so do the weightage of the stocks in the indices. These indices were developed by the exchanges to provide a benchmark to foreign institutional investors (FIIs) and off-shore funds and to offer them an instrument for measuring returns on their equity investments in dollar terms. This shows you the approximate impact of the rupee-dollar movements.

For the Dollex all the other conditions remain the same as the original Sensex, including the base year of 1978-79. The weights of the 30 stocks and the revisions are also simultaneous in the Sensex and the Dollex. The only difference is that the S&P BSE Dollex 30 is dollar-denominated while the Sensex is rupee-denominated. The Dollex is classified as a strategy index in the BSE lexicon.

What is Deftly?

The NSE Defty is to the NSE Nifty what the Dollex is to the Sensex. The NSE Defty is dollar-denominated Nifty. So, if the rupee/dollar equation changes, that change is reflected in the NSE Defty vis-à-vis the Nifty. The NSE Defty is similar to the Nifty in all other aspects including the base year of 1994-95 and the constituents of the index.

Relevance of These Indices

Indices such as the Dollex and the Defty will be most relevant to those investors who have invested in Indian equities via dollars. Other than FIIs, there are non-resident Indians (NRIs) who invest in equities in India using dollars. Since these indices take into account currency fluctuations, the returns compared with the rupee-term indices will be different.

Dollex depicts growth in the market value of the constituent stocks over the base period in both the stock prices and the foreign exchange variation. In other words, the Dollex calculates the index by taking the current and base market values in dollar terms instead of in rupee terms. These indices are of specific use to overseas investors, as it helps them measure their ‘real returns’ after providing for the exchange rate fluctuations. At the end of the day, they bring in dollars and take out dollars so they are keen to know dollar returns. That is what the Defty and Dollex capture for the Nifty and Sensex respectively. Here is an interesting timeline of the Dollex launches including the sub-indices.

• Dollex-200, a dollar version of BSE 200, was launched on May 27, 1994
• Dollex-30, a dollar-linked version of BSE 30, was launched on July 25, 2001
• Dollex-100, a dollar-linked version of BSE 100, was launched on May 22, 2006

These are calculated by taking into account the real-time rupee/US$ Exchange rate and are displayed through BOLT which is the BSE online terminals.

Formula : (Index Value (In local currency) X Base rupee-US$ rate) ÷ Current rupee-US$ rate

How the indices are different

The S&P BSE SENSEX, also called the BSE 30 or simply the SENSEX, is essentially a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange with the highest weightage and macroeconomic relevance to the Indian economy using a stock market app.

The S&P BSE Dollex is the USD version of the S&P BSE index, a rule-based, broad index that has been designed to measure the performance of these same 30 Sensex companies (based on size and liquidity across sectors) listed at BSE Ltd in dollar terms rather than in rupee terms.