If a cricketer aspires to play for the Indian cricket team, he or she should have performed well in Ranji Trophy matches.
Based on his past achievements, he or she gets selected to play for the main Indian cricket team.
Stocks in the Nifty next 50 index fund category are similar to the player who plays at Ranji trophy and aspires to play for the main team “Nifty 50”.
If a stock performs well, it can become a part of the prestigious nifty 50 index. When a stock is at the growth stage, the investors who bet on this stock’s future growth prospects can reap excellent returns in long term. Nifty next 50 index fund is one such fund!
Related read: why Buffett favors Index fund: 3 terrific reasons
Nifty Next 50 Indices
The Nifty next 50 indices represents the bottom 50 companies in Nifty 100 after excluding the Nifty 50 companies.
Companies in this index aims to measure the performance of next 50 large cap companies on the basis of free float market capitalization within Nifty 100. So the selection of securities are based on free- float market capitalization.
The Nifty next 50 indices represents about 10 % of the free float market capitalization of the stocks listed on NSE.
Like Nifty 50, Nifty next 50 indices gets rebalanced twice in a year in the month of January and July.
This index has base date of November 3, 1996 with a base value of 1000. Over the last 18 years, 41 stocks have been upgraded to Nifty 50, Out of which 27 stocks presently remains the part of Nifty 50.
What is Nifty next 50 index fund?
Nifty next 50 index fund is a fund which tracks the Nifty next 50 indices to generate similar returns and risk profile.
Portfolio diversification:
Nifty next 50 indices has a well diversified portfolio.
Top 5 sectors contributes for 79% exposure. Over all, this index is exposure to 14 sectors with 11 sectors having individual weight lesser than 10 % each.
Top 10 stocks contributing close to 36.9% exposure with individual stocks weights ranging between 5.4% to 2.9%.
Nifty next 50 index Fund Performance:
Since its inception on November 1996, Nifty Next 50 index has delivered an return of 16.3% compared to 12% return on Nifty 50 during the same period. This is a substantial an excess return of 4.3% return per annum.
Comparison return of Nifty next 50 vs Nifty 50
Even in 10 years, 7 years, 5 year period Nifty next 50 has outperformed Nifty 50 by 6.1%, 6%, 5.4 % respectively.
With high return comes high risk too. While in Nifty next 50 case the “return to risk” ratio is marginally higher than Nifty 50, but in the long term “return to risk” ratio difference of both index is almost same.
Also when you look at the calendar year return, Nifty next 50 has outperformed the Nifty 50 in 14 out of 26 calendar years. Specifically in years like 1999, 2003,2008 significant outperformance shown by Nifty next 50.
Also returns of Nifty next 50 is almost similar to nifty midcap 150 with a better downside protection.
Advantages of investing in index:
Index follows a rule based approach. Unlike humans , Index has no emotions or favoritism when it comes to selecting stocks.
Lower expense ratio. Investors pay way less fee compared to active funds.
Outperformance of return in long term compared to similar category of large cap funds.
Who should not invest?
This index may underperform the Nifty for 3 years, 5 years. Those who lose their faith or peace of mind can exit and invest in Nifty 50.
Investors who can not handle volatility (period < 3 years)
Investors who cannot invest for more than 5 years or 7 years should not go near this fund.
Nifty Next 50 ETF:
- Nippon India ETF Junior Bees
- SBI – ETF Nifty next 50
- ICICI Prudential nifty next 50 ETF
- UTI – Nifty next 50 ETF
- Mirae Asset Nifty next 50 ETF
- Aditya Birla Sun Life Nifty next 50 ETF
- HDFC Nifty next 50 ETF
Nifty next 50 index fund list:
UTI Nifty Next 50 Index fund:
UTI Nifty next50 index fund nav at 13.96 with AUM of 1,926Cr and expense ratio of 0.33%
ICICI Prudential Nifty next 50 Index fund:
This index fund NAV stands at 34/per unit , With AUM of 2165 Cr and expense ratio of 0.30%
IDBI Nifty next 50 Index fund:
This index fund NAV stands at 24/per unit , With AUM of 49 Cr and expense ratio of 0.32%
HSBC Nifty next 50 Index fund:
This index fund NAV stands at 16.6/per unit , With AUM of 56 Cr and expense ratio of 0.35%
DSP Nifty next 50 Index fund:
This index fund NAV stands at 14/per unit , With AUM of 228 Cr and expense ratio of 0.32%
Motilal Oswal Nifty next 50 Index fund:
This index fund NAV stands at 13/per unit , With AUM of 118 Cr and expense ratio of 0.33%
Kotak Nifty next 50 Index fund:
This index fund NAV stands at 12/per unit , With AUM of 96 Cr and expense ratio of 0.31%
SBI Nifty Next 50 Index Fund:
This index fund NAV stands at 10.5/per unit , With AUM of 423 Cr and expense ratio of 0.34%
Axis Nifty next 50 Index fund:
This index fund NAV stands at 9/per unit , With AUM of 73Cr and expense ratio of 0.23%
HDFC Nifty next 50 Index fund:
This index fund NAV stands at 8.4/per unit , With AUM of 341Cr and expense ratio of 0.30%
Aditya Birla Sun Life Nifty Next 50 Index fund:
This index fund NAV stands at 9/per unit , With AUM of 35Cr and expense ratio of 0.35%
Edelweiss Nifty Next 50 Index fund:
This index fund NAV stands at 8/per unit , With AUM of 22Cr and expense ratio of 0.22%
NAVI Nifty Next 50 Index Fund:
This index fund NAV stands at 8/per unit , With AUM of 88Cr and expense ratio of 0.12%
Conclusion:
Rupee 1 invested in this fund would have grown to 51rupees in 26 years. (More return comes with slightly higher risk)
Investors who has the gut to withstand short term volatility and underperformance can invest in it. Also please check the 50 companies and top holdings firms before investing.
