Nippon India Nifty 50 Value 20 Index Fund Analysis

Last updated: 10 Feb, 2021 | 07:19 am

Nippon India Nifty 50 Value 20 Index Fund Analysis

Basic Details

Investment Approach

  • The fund will invest in equity and equity-related securities and portfolio replicating the composition of the Nifty 50 Value 20 Index, subject to tracking errors
  • Upto 5% of the assets can be invested in Money Market instruments, Reverse repo and / or Tri-Party Repo and/or Schemes which invest predominantly in the money market securities or Liquid Schemes

What is the Nifty 50 value 20 index?

  • This index chooses 20 stocks from the Nifty 50 based on certain criteria which indicate value.
  • Stocks are selected on the basis of ROCE (Return on Capital Employed), P/E, P/B and Dividend Yield. Relatively lower P/E and P/B stocks from the Nifty 50 get a better rank, while higher Dividend Yield and ROCE receive a better rank. 
  • Value rank of each stock is determined using criteria of Low PE (30% weight), low PB (20% weight), high dividend yield (10% weight) and high ROCE (40% weight). The top 20 are then chosen as part of the index. 
  • Each constituent in the index is capped at 15%.

Current constituents of Nifty 50 value 20 Index

The table below shows the current constituents of this index.

  • The top 5 companies include Infosys, TCS, HUL, ITC and L&T.

What works for the fund

  • Outperformance wrt Nifty 50: The Nifty Value 20 Index has comfortably outperformed Nifty in the last 5 year period (as seen in the chart below). However, the inception date for this index is March 2014, and hence the fund does not have a 10-year track record.
  • Lower risk as compared to Nifty 50: The fund has a lower Standard Deviation and Beta as compared to Nifty 50 index. This is impressive, as this index has delivered better returns than Nifty 50 with a lower risk profile.
  • More favourable valuations as compared to Nifty 50: Given its value tilt, the index is trading at more favourable valuations (lower P/E, lower P/B) as compared to Nifty 50. It also has a higher dividend yield.

Cons

  • Limited performance history (Started only in March 2014). 
  • Given the recent rally, even the "value stocks" among the Nifty 50 are trading at very high valuations. The fund could be impacted in case of a correction.

Final take

While the performance history is limited, the fund seems to be a good alternative to buying the Nifty 50 index, given its lower risk and higher return profile historically. The fund is also expected to have a lower drawdown as compared to Nifty 50.

Finzoom Investment Advisors Private Limited (Brand Name - INDmoney, INDwealth, IND.app, IND.money, INDsave.com) makes no warranties or representations, express or implied, on products and services offered through the platform. It accepts no liability for any damages or losses, however, caused in connection with the use of, or on the reliance of its advisory or related services.

Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, goal, time frame, risk and reward balance and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs. Performance and returns of any investment portfolio can neither be predicted nor guaranteed.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Marketing and distribution of various financial products such as loans and deposits are powered by Finzoomers Services Private Limited.

INDmoney, INDwealth, IND.app are brand and product of Finzoom Investment Advisors (P) Limited.

© Finzoom Investment Advisors Private Limited

[SEBI RIA Registration No: INA100012190] [Type of Registration: Non-Individual] [Validity of registration: December 17, 2018-Perpetual] [Address: 616, 6th Floor, Suncity Success Tower, Golf Course Extension Road, Sector – 65, Gurugram, Haryana- 122005] [Principal Officer details: Mr. Gaurav Sharma, Email id: principalofficer@indwealth.in, Contact No. 8800826254] [Corresponding SEBI local office address: Securities and Exchange Board of India, Local Office, First Floor, SCO 127-128, Sector 17C, Chandigarh-160017]

[ARN - 151913] [Platform Partner : BSE (Member code-24801)] [CIN - U67190HR2018PTC073294] [GST No : 06AADCF3538Q1Z8]