Index Investing: Performance of Top Nifty Indexes in 2024
Investing in the stock market can be an intimidating task with numerous stock options to choose from and multiple recommendations. That's where index investing comes to play. Index investing is a passive technique of investing in a collection of securities that tracks a specific market index.
In simple terms, index investing allows you to invest in stocks that mirror a particular stock market index. And in India, the benchmark index of the National Stock Exchange of India (NSE) is Nifty Index while the index of the Bombay Stock Exchange (BSE) is the Sensex Index.
For a more detailed view on Index funds in India, click here.
Index Investing: How it Works?
Since index investing is a passive investment strategy, you don't have to pick and choose stocks. A fund portfolio manager builds a portfolio that mirrors a specific index. Suppose there is an Index Fund that is replicating the NSE Nifty Index. Hence this fund comprises 50 stocks in its portfolio in a similar ratio. The goal is to mimic the profile and performance of the underlying index.
Index Investing: Positives
- Low costs: Index funds are generally characterized by their low cost, as they do not have to pay for active management.
- Diversification: Index funds provide diversification by investing in a basket of securities. This helps to reduce risk.
- Passive management: Index funds are passively managed, which means that they do not try to time the market or pick individual stocks. This reduces costs and volatility.
Index Investing: Risks
- Market risk: The value of an index fund can go down as well as up, so you could lose money.
- Liquidity risk: Index funds may not be as liquid as individual stocks, so it may be difficult to sell your shares quickly if you need to.
- Tracking error: There is always a chance that an index fund will not track its underlying index perfectly.
Index Investing: Top Index Funds in the Market
| Index Funds | AUM | 3-Y Return | Expense Ratio |
|---|---|---|---|
| HDFC Index S&P Fund Sensex Plan-Direct Plan | Rs 5289 cr | 21.11% | 0.2% |
| SBI Nifty Index Fund Direct Growth | Rs 4796 cr | 21.42% | 0.18% |
| ICICI Prudential US Bluechip Equity Fund Direct Plan Growth | Rs 2911 cr | 15.9% | 1.2% |
| UTI Nifty Next 50 Index Fund Direct Growth | Rs 2488 cr | 17.73% | 0.34% |
| Motilal Oswal Nifty Midcap 150 Index Fund Direct Growth | Rs 921 cr | 31.98% | 0.3% |
| Franklin India NSE Nifty 50 Index Fund Direct Growth | Rs 551 cr | 21.11% | 0.24% |
| PGIM India Large Cap Fund Direct Plan Growth | Rs 495 cr | 19.8% | 0.91% |
| Motilal Oswal Nifty Smallcap 250 Index Fund Direct Growth | Rs 383 cr | 34.39% | 0.36% |
| IDBI Nifty 50 Index Fund Direct Growth | Rs 208 cr | 21.06% | 0.32% |
Index Investing: How have Nifty Indexes performed in 2023
Nifty 50 Index Funds: The Nifty 50 is a stock market index of the 50 largest and most liquid stocks listed on the NSE. It is the most widely followed stock index in India. The Nifty 50 has returned 5.89% year-to-date (YTD) as of August 18, 2023.
Nifty Next 50: The Nifty Next 50 is a stock market index of the next 50 largest listed on the NSE. It is a proxy for the broader Indian stock market. The Nifty Next 50 has returned 3.4% YTD as of August 18, 2023.
Nifty Midcap 50: The Nifty Midcap 50 is a stock market index of the 50 largest mid-cap stocks listed on the NSE. It is a good option for investors who are looking for growth potential with some downside protection. The Nifty Midcap 50 has returned 22.80% YTD as of August 18, 2023.
| Nifty Indexes | Current Value (As of 18 Aug, 2023) | YTD |
|---|---|---|
| Nifty 50 | 19,260.35 | 5.89% |
| Nifty Next 50 | 43,691.95 | 3.40% |
| Nifty 100 | 19,171.40 | 4.57% |
| Nifty 200 | 10,241.05 | 6.66% |
| Nifty 500 | 16,729.95 | 7.75% |
| Nifty Midcap 50 | 10,833.10 | 22.80% |
| Nifty IT | 30,646.25 | 6.64% |
| Nifty Auto | 15,410.30 | 21.65% |
| Nifty FMCG | 51,541.05 | 16.63% |
| Nifty Pharma | 15,324.20 | 22.11% |
Source: Google Finance
Index Investing: Should you invest?
Index investing is a good option for investors who are looking for a low-cost, diversified way to invest in the stock market. It is also a good option for investors who are not comfortable with picking individual stocks. However, you should always consider your investment goals, time horizon, and risk tolerance before investing since the stock market is unpredictable.
Index Investing: Key Takeaways
- Index investing is a passive strategy involving investing in a portfolio mirroring a specific market index, like Nifty or Sensex in India.
- Index investing offers diversification at low costs, but has market risks and tracking error.