Return Calculation Methodology
Investing involves risks and investments may lose value. Past performance does not guarantee future returns and performance of smallcases are subject to market risks.
How we calculate returns
smallcase performance does not include transaction fees and other related costs. No actual money was invested or trades were executed while calculating smallcase performances. Returns are based on end of day prices of stocks in a smallcase, provided by exchange approved third party vendors. All smallcases are reviewed and rebalanced as per a schedule depending on the smallcase. As a result of this review process, some stocks may be added, some may be removed and some may undergo weight changes. smallcase returns reflect all these changes.
We assign an index value of 100 at the smallcase inception date. This means that we assume a hypothetical investment of INR 100 in the smallcase at the inception date. Individual stock investments are calculated as per their weights in the smallcase. Thus, a stock having a weight of 10% in the smallcase will receive a hypothetical investment of INR 10 ( 10% * INR 100) on the inception date. After calculating individual stock investments, we calculate the individual number of shares that could be bought using hypothetical investments determined in the last step. If the same stock which received a hypothetical investment of INR 10 has an end of day stock price of INR 2 on the inception date, it will have 5 shares in the smallcase (INR 10/ INR 2). In this way we determine the individual number of shares of each stock in the smallcase, on the inception date. Multiplication of individual number of shares of different stocks in the smallcase with respective end of day share prices on the inception date, results in a total hypothetical investment of INR 100 (index value at the inception date) Once the individual number of shares are decided for a stock in the smallcase, it remains constant unless changed in a review/rebalance process. Every day index value is calculated by multiplying no of shares of each stock with respective end of day prices of stocks on that particular day. If the index value of the smallcase after 30 days is 110, it means that your hypothetical investment of INR 100 is worth INR 110 now. Thus, smallcase is worth INR 10 more compared to the investment date and has generated a return on 10% (INR 10/ INR 100). smallcase returns for any time period (week/ quarter/ annual) is determined in the same manner by comparing beginning and end of period index values.
Historical time periods including pre-inception
Assuming a hypothetical investment of INR 100 at the beginning of the period under focus, we calculate the individual stock investments and number of shares in the same manner as described earlier. This is done, assuming the same weighting scheme as it was on the inception date. Returns are calculated in the similar fashion using index values. For a time period extending before the inception date, changes resulting from review/rebalance process are incorporated only for the period after inception date.