NSE Indices Comparison 31Dec2023
(This
is for information purposes only. This should not be construed as a
recommendation or investment advice even though the author is a CFA Charterholder. Please consult your financial
adviser before taking any investment decision. Safe to assume the author has a vested
interest in stocks / investments discussed if any.)
This is an update of my earlier blog published a year ago. The analysis is based on the fundamentals, returns, risk measures, stock weights and sector weights of the indices.
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Let us look at the four indices of NSE (National Stock Exchange of India), namely, Nifty 50, Nifty 100, Nifty 500 and Nifty Next 50. All the data are as at the end of 31st of December 2023.
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Related blogs on Indian Stock Indices:
Nifty 50 Index Yearly Movement 31Dec2023
Nifty 50 Index Quarterly Movement 31Mar2023
BSE 500 versus S&P 500 Compare 31Mar2023
Nifty 50 Index Yearly Movement 31Dec2022
NSE Indices Comparison 31Dec2022
BSE 500 versus S&P 500 Comparison 31Dec2022
Nifty 50 Index quarterly movement Apr2022
Nifty 50 Index Evolution 2011 to 2021
NSE Indices Comparison 31Dec2021
Fundamentals
Table
1 shows the returns, risks and valuation measures of these four
indices.
Please click on the image to view better >
As shown in table 1 above, Nifty 50 index's five-year annualised return is 16.2 per cent versus just 14.6 per cent for Nifty Next 50 index, but on a one-year basis Nifty Next 50 (formerly known as Nifty Junior) has done far better than Nifty 50.
As small- and mid-cap stocks have done exceedingly well in calendar year 2023, Nifty Next 50 and Nifty 500 indices have outperformed the Nifty 50, which consists of large-cap stocks.
Due to Adani stocks meltdown in the first quarter of 2023, Nifty Next 50 was doing badly in the first half of 2023 as can be seen from the negative returns generated by the index during the early part of 2023 (blog 15Feb2023).
However, as mid- and small-cap stocks have generated superior returns in the last half of 2023, Nifty Next 50 has been able to outperform Nifty 50, on a one-year basis, by the end of 2023.
The one-year standard deviations (a risk measure indicating volatility of an index or a stock) for these Nifty indices analysed here are much lower compared to the historical standard deviations -- this could be due to the fact between April and December of 2023, Indian stocks have provided spectacular returns with lower volatility.
As can be seen from the wide difference between since-inception standard deviation and 5-year standard deviation, Indian stocks have been experiencing considerably lower volatility in the past seven to eight years (except during the COVD-19 Pandemic outbreak year 2020).
As indicated by the price-earnings or P/E ratio, the Nifty indices are richly valued compared to history as well as compared to other emerging markets.
Among these indices, Nifty Next 50 is more richly valued than Nifty 50 -- maybe, indicating investors' expectations of superior returns from Nifty Next 50 stocks.
It may be noted 29Dec2023 is the last trading day of 2023.
Top 10 Stocks
Table 2 shows the share of top five and top 10 stocks in the indices.
Please click on the image for a better view >
This
table 2 shows the share of top five and top 10 stocks in the indices.
Concentration risk in Nifty 50 is much higher as compared to, say, Nifty
500. Of the four indices analysed, Nifty Next 50 has the lowest
concentration risk.
As compared to 2022, the top 10 components in Nifty Next 50 have changed almost completely in 2023 -- with the index retaining only two stocks (Bharat Electronics and Tata Power) in the top 10 as at the end of 2023.
In 2023, LTIMindtree moved to Nifty 50 from Nifty Next 50. Bellwether stocks, like, Pidilite Industries, SRF, Vedanta and Godrej Consumer Products have lost their pedestal position in Nifty Next 50 index during 2023. The big churn in Nifty Next 50 seems to be common every year.
Top 10 Sectors
Please click on the image for a better view >
These NSE indices continue to be heavily dominated by sectors such as, financial services, information technology, oil & gas, fast moving consumer goods (FMCG) and automobile -- as indicated by their dominance with almost two-thirds of weight in the indices.
Compared to Nifty 50 and Nifty 500, Nifty Next 50 bears lower concentration risk of sectors -- but compared to end-2022, the concentration risk is higher as at the end of 2023 for Nifty Next 50.
For comparison purposes, see blog dated 24Jan2022 and blog dated 12Jan2023.
Nifty 50 and Nifty Next 50 Free Float
Tables 4 and 5 provide details of free float of top 10 stocks in Nifty 50 and Nifty Next 50.
Free
float is defined as the number of listed equity shares of a particular
company that are readily available for trading on the stock exchange.
Free float is nothing but number of shares held by investors other than
the stake owned and controlled by promoters.
As shown in table 4, the promoters' stakes in HDFC Bank, ICICI Bank, ITC, and Larsen & Toubro are nil and as such their free float is 100 per cent--which means all the outstanding equity shares in these firms are available for trading.
Free
float for TCS Ltd. is only 27.6 per cent as the remaining shares
are held by the promoters.
This is due to
the fact that six listed companies in top ten of Nifty 50 are
professionally-run companies (for all practical purposes, Axis Bank has
no promoter, though Government of India holds 8.2 percent as technical
promoter -- so is the case with Infosys).
To Sum Up
This is an analysis of the broad and narrow indices of NSE -- so that one can compare
them and make their own investment decisions. This is not a
recommendation, this is meant for educational purpose only -- so that
novice investors can better appreciate the underlying dynamics of the
indices in particular and stock market in general.
- - -
References:
NSE indices dashboard - historical reports can be accessed
Nifty 50 factsheet and components
Nippon India ETF Nifty Next 50 Junior BeES
Data screenshots > NSE Indices and factsheet > Nifty 50, Nifty Next 50, Nifty
500, Nifty Midcap 150, Nifty Smallcap 250, Nifty Total Market, Nifty
Bank, Nifty IT and Nifty FMCG, Nifty Auto, Nifty Metal, Nifty Pharma and Nifty Healthcare indices
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Disclosure: I've vested interested in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if any.
Disclaimer: The analysis and opinion provided here are only for information purposes and should not be construed as investment advice. Investors should consult their own financial advisers before making any investments. The author is a CFA Charterholder with a vested interest in financial markets.
CFA Charter credentials - CFA Member Profile
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He blogs at:
https://ramakrishnavadlamudi.blogspot.com/
X (Twitter) @vrk100
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