Nifty 50 Index Vs Nifty 100 Index – Which is healthier? Is Nifty 50 plus Nifty Subsequent 50 equal to the Nifty 100 index? Allow us to perceive from the final 21 years of information.
Because the Nifty 100 Index is the mix of the Nifty 50 Index and Nifty Subsequent 50 Index, we by default assume that Nifty plus Nifty Internet 50 is the same as the Nifty 100 Index. Nonetheless, the truth is completely totally different.
What’s Nifty 100 Index?
Nifty 100 is a diversified 100 inventory index representing main sectors of the economic system. Nifty 100 represents prime 100 firms based mostly on full market capitalisation from Nifty 500. This index intends to measure the efficiency of huge market capitalization firms. The Nifty 100 tracks the habits of a mixed portfolio of two indices viz. Nifty 50 and Nifty Subsequent 50.
Nonetheless, it needs to be clarified that Nifty 100 is just not merely half of Nifty 50 and half of Nifty Subsequent 50. Upon inspecting the present elements of Nifty 100, it turns into obvious that roughly 77% of the shares in Nifty 100 are sourced from the Nifty 50 Index, whereas the remaining 23% are derived from the Nifty Subsequent 50 Index.
Subsequently, even supposing Nifty 100 consists of shares from each Nifty 50 and Nifty Subsequent 50, the distribution of weightage is just not equal. In actual fact, it’s considerably skewed in the direction of the Nifty 50. The Nifty 50’s prime 10 shares alone account for roughly 45% of the entire weightage in Nifty 100.
Nifty 50 Index Vs Nifty 100 Index – Which is healthier?
Now, allow us to attempt to perceive which is healthier between the Nifty 50 Index Vs Nifty 100 Index.With a view to acquire a greater understanding, let’s analyze the information from the previous 21 years. I’ve chosen this timeframe as the bottom date for the Nifty 100 is 1st Jan 2003. Subsequently, we are going to concentrate on learning the Nifty 50 TRI, Nifty Subsequent 50 TRI, and Nifty 100 TRI. All through this era, we now have a complete of 5336 each day knowledge factors.
On condition that the bottom date for Nifty 100 is 1st Jan 2003, let’s analyze the efficiency of Nifty 50 TRI, Nifty Subsequent 50 TRI, and Nifty 100 TRI by contemplating an funding of Rs.1,00,000 in every of those indices.
Upon inspecting the traits and current figures, it’s evident that the Nifty Subsequent 50 TRI Index seems to be performing exceptionally properly. Nonetheless, it’s crucial that we chorus from making assessments solely based mostly on particular returns. It’s essential to investigate the drawdowns of those indices initially, adopted by an examination of the rolling returns.
Drawdown refers back to the decline within the worth of an funding or portfolio from its peak to its lowest level over a particular interval. It’s a measure of draw back threat, indicating how a lot an investor might doubtlessly lose from the very best level earlier than the worth recovers.
The Nifty Subsequent 50 TRI Index displays considerably increased volatility when in comparison with each the Nifty 50 TRI and Nifty 100 TRI. This highlights the significance of not solely counting on returns when making funding selections.
Allow us to now look into the rolling returns of 1 Yr, 3 Yrs, 5 Yrs, and 10 Yrs.
# 1 Yr Rolling Returns of Nifty 50 TRI, Nifty Subsequent 50 TRI and Nifty 100 TRI
By way of the yearly rolling return knowledge of 5088, the Nifty 100 TRI Index has outperformed the Nifty 50 TRI Index for roughly 47% of the time. However, the Nifty Subsequent 50 TRI Index has outperformed the Nifty 50 TRI Index by 54%. This means that at any time when the Nifty Subsequent 50 has outperformed the Nifty 50, the Nifty 100 has additionally outperformed the Nifty 50. This statement is clearly depicted within the supplied picture.
# 3 Years Rolling Returns of Nifty 50 TRI, Nifty Subsequent 50 TRI and Nifty 100 TRI
It needs to be noticed that the Nifty 50 TRI and Nifty 100 TRI are performing on the identical stage. However, at any time when the Nifty Subsequent 50 TRI surpasses or falls behind, the excellence turns into obvious. Nifty 100 TRI outperformed the Nifty 50 TRI for round 42% occasions and Nifty Subsequent 50 TRI outperformed the Nifty 50 for round 54%.
# 5 Years Rolling Returns of Nifty 50 TRI, Nifty Subsequent 50 TRI and Nifty 100 TRI
For five years rolling returns additionally, the outcomes are comparable of what they had been for 1 yr and three years rolling returns.
# 5 Years Rolling Returns of Nifty 50 TRI, Nifty Subsequent 50 TRI and Nifty 100 TRI
The Nifty 100 TRI seems to be outperforming the Nifty 50 TRI because of the seen outperformance of the Nifty Subsequent 50 TRI. Nonetheless, the margin is slim for the reason that majority of the portfolio consists of Nifty 50 shares reasonably than Nifty Subsequent 50 shares.
Conclusion –
- Nifty 100 is just not equal to Nifty 50 plus Nifty Subsequent 50 in equal phrases.
- In Nifty 100, the key constituent is Nifty 50 and the minor constituent is Nifty Subsequent 50.
- Regardless of being categorised as a large-cap index, the Nifty Subsequent 50 displays traits extra generally related to mid-cap indices, equivalent to increased volatility and returns. This makes it an interesting choice for a lot of buyers when in comparison with the Nifty 50. Nonetheless, it is very important observe that investing within the Nifty Subsequent 50 comes with the next stage of threat. (Check with my earlier publish “Nifty Subsequent 50 Vs Nifty Midcap 150 – Which is finest?“).
- You may simply have higher management over the % of allocation by investing individually within the Nity 50 and Nifty Subsequent 50 Index than proudly owning the Nifty 100. Nonetheless, if you’d like each Nifty 50 and Nifty Subsequent 50 Index constituents in a single fund and are fantastic with the upper publicity of Nifty 50, then you may take into account Nifty 100.
- I counsel a separate arrange of Nifty 50 and Nifty Subsequent 50 than proudly owning a single Nifty 100 fund for higher management over your allocation and threat administration.