NSE Indices Comparison 31Dec2024

NSE Indices Comparison 31Dec2024

 

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(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.

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 2024. 

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Related blogs on Indian Stock Indices:

 

Please check below (after the end of the article)

 

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1. Fundamentals

 

Table 1 shows the returns, risks and valuation measures of these four indices. 

 

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As shown in table 1 above, Nifty 50 index's five-year annualised return is much lower at 15.5 per cent versus 20.1 per cent for Nifty Next 50 index; even 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 and 2024, Nifty Next 50 and Nifty 500 indices have outperformed the Nifty 50, which consists of large-cap stocks.

 

Stocks in Nifty Next 50, like, Zomato, Vedanta, Info Edge (India), InterGlobe Aviation, Hindustan Aeronautics, Divi's Laboratories and Siemens have contributed spectacular returns of between 35 and 80 per cent in calendar year 2025--this has resulted in Nifty Next 50 outperforming Nifty 50 by a big margin in 2025. 

 

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 April2023 and Sep2024, 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 eight to nine 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 performance from Nifty Next 50 stocks.

2. 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 and Nifty 500 have the lowest concentration risk.

 

Reliance Industries used to be number one stock in Nifty 50, but it is now relegated to third position in the index, after HDFC Bank and ICICI Bank. Comparatively, it was in second rank at the end of Dec2023 and in first rank at end-Dec2022. 

 

As compared to 2023, the top 10 components in Nifty Next 50 have changed almost completely in 2024 -- with the index retaining only one stock (Hindustan Aeronautics) in the top 10 as at the end of 2024.

 

In Sep2024, Trent and Bharat Electronics moved to Nifty 50 from Nifty Next 50. Stocks, like, Zomato, InterGlobe Aviation, Varun Beverages and Vedanta have climbed up the ladder in 2024. But many prominent stocks have lost their pedestal position in Nifty Next 50 index during 2024. The big churn in Nifty Next 50 seems to be common every year.

3. Top 10 Sectors

Table 3 shows the weights of top three and five sectors in these NSE indices as at the end of December 2024.

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, consumer services, oil & gas, fast moving consumer goods (FMCG), power and automobile -- as indicated by their dominance with almost two-thirds of weight in the indices.

 

Compared to Nifty 50 and Nifty 100, Nifty Next 50 bears lower sector concentration risk.

 

Compared to end-Dec2023, the sector concentration risk is higher as at the end of 2024 for Nifty Next 50, as Zomato (with 7.9% stake in the Nifty Next 50) and Jio Financial Services (4.0%) have dominating presence in the index.

 

However, the sector concentration risk for Nifty 50, Nifty 100 and Nifty 500 indices is lower as at the end of Dec2024 compared to end-Dec2023 figures.

For comparison purposes, see blog dated 24Jan2022, blog dated 12Jan2023 and blog dated 27Jan2024. 

 

 

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.

 

 

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Related blogs on Indian Stock Indices:

 

 

NSE Emerging Indices Comparison 30Sep2024

 

Sensex versus Gold Price 29May2024

 

The Little Secret Behind Nifty Next 50 Index's Recent Success 13May2024

 

NSE Indices Calendar Year Returns 2006 to 2004 05May2024

 

How to Buy Nifty Midcap 150 Index 03May2024

 

India Passive Funds and Their Asset Size 29Apr2024

 

Understanding Real Sensex and Currency Debasement 14Mar2024

 

Equity ETFs and Equity Index Funds Compared 05Feb2024

 

Nifty 50 Index Yearly Movement 31Dec2023 

BSE 500 versus S&P 500 Indices Compare 31Dec2023

 

NSE Indices Comparison 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 Jun2022

 

Nifty 50 Index quarterly movement Apr2022

 

Nifty 50 Index Evolution 2011 to 2021

 

NSE Indices Comparison 31Dec2021  

 

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References and additional data:

 

Nifty Indices - Index factsheets

 

Raw data > 

 

 

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Read more:

 

Blog of Blogs Theme-wise 

 

Weblinks and Investing

 

India Fixed Income Data Bank

 

Indian Economy Data Bank 

India Forex Data Bank 

 

 

JP Morgan Guide to Markets 31Dec2024

 

Corporate Groups and Listed Companies 29Dec2024

 

Corporate Governance Concerns - Indian Companies 13Dec2024

 

Opinion on Maharashtra Seamless 15Nov2024

 

Wars and Wealth Protection

 

Mutual Fund Asset Class Returns 30Sep2024

 

Primer on Global Capability Centres - India is World's GCC Capital 

 

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Disclosure:  I've got a vested interest 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.

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Big Surge in Number of Shareholders in PSUs - vrk100 - 08Jun2024

Big Surge in Number of Shareholders in PSUs 

 

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(This is for information and educational 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.)

 

 

In the past four years, that is, between end of March2020 and end of March2024, the number of demat accounts in India rose by almost 11 crore, showing an absolute growth of almost 270 per cent in four years or annualised growth rate of 38.5 per cent.

India has never experienced such a growth in number of demat accounts before.

The outbreak of COVID-19 Pandemic in Mar2020 was a turning point for retail investor interest in the Indian stock market. They have since been flocking in droves to stock market.

 

1. Growth of retail investors

 

When retail and small investors are piling into stocks, it is generally not a good sign for future stock prices. It is not that institutional investors are smarter than retail investors.

Institutional investors both in India and abroad, like, sovereign wealth funds, endowments, foundations, foreign portfolio investors (FPIs), domestic institutional investors (DIIs), insurance companies and pension funds tend to hold stocks for the long term as they do not have any immediate obligations to encash their holdings. 

 

For example, a pension fund named Employee Provident Fund Organisation (EPFO) has steadily increased their investments in Indian stocks over several years and they tend to hold them for long periods of time.

Retail investors, in recent years, have been trading heavily in riskier derivatives segment of the market. India's capital market regulator in a study last year observed that almost 90 per cent of individual traders in equity derivatives segment incurred losses during the study period.

 

The time-frame of retail investors is much shorter and as such they tend to exit a stock at the first sign of selling or trouble or panic.

This is exactly what happened to PSU stocks on 04Jun2024, the day when results of India's Parliamentary polls were announced and the poll outcome was against the market expectations. 

 

A large number of retail investors have thronged the PSU stocks, railway stocks, defense stocks and stocks belonging to power, capital goods and infrastructure sectors in the recent past lifting their share prices enormously. 

 

 

2. Steep fall in PSU stocks on a single day

 

PSU stocks are public sector undertakings owned by Government of India. As per the Companies Act, 2013, a government company is a company where the shareholding of Central government and / or State government is not less than 51 per cent of the total. 

 

Many PSU stocks on 04Jun2024 suffered steep losses of between 10 and 25 per cent. Yes, the stocks suffered single-day loss of up to 25 per cent, which indicates the degree of market euphoria and subsequent disappointment towards these stocks. 

 

How PSU stocks fared on 04Jun2024?

 

Here is a list of PSU stocks that had suffered the most on 04Jun2024:

 

Exhibit showing list of 20 PSU stocks with number of shareholders for the past four years:

 

 

The above list is in the order of percentage fall from biggest fall to lowest fall on 04Jun2024.

 

The 20 PSU stocks shown in the above exhibit suffered losses of between 15 and 20 per cent in a single day when the results of India’s parliamentary polls were announced.

 

The top loser in the list was REC Ltd stock which suffered a loss of 25 per cent (however, it must be noted the stock provided a spectacular one-year return of 280 per cent prior to the fall).

 

The least loser in the list was Punjab & Sind Bank stock which declined by 15 per cent (the stock's one-year return was 85 per cent prior to the fall -- the single-day loss percentages are given at the end of the blog).

 

Instances of stocks falling by 15 to 25 per cent in a day are rare and are seen as harbingers of more volatility for stocks going forward and further possible losses.

 

Of course, some of these PSU companies have delivered better revenue and profit growth in recent years and after a lost decade of stagnation, the stocks got re-rated by stock market. As you know, turnaround stocks provide spectacular returns in a short period of time.

 

Due to a combination of re-rating, better results, large money flows and general market optimism, the shareholders have been enjoying amazing returns in most of the PSU stocks in the past one to two years.

 

The momentum in these stocks attracted a large number of retail shareholders to these stocks. 

 

The details of 'public' shareholding in the stocks is shown in the above exhibit. Public shareholding, for the purpose of this blog, is the shareholding other than that belonging to promoters, FPIs and DIIs.

 

(Note: Public shareholding shown in the above exhibit should not be confused with "public shareholding" as defined by India's capital market regulator SEBI or Securities and Exchange Board of India. SEBI defines "public shareholding" as equity shares held by public and "public" means persons other than promoters, company's subsidiaries and associates. As per SEBI, every listed company in India shall maintain a minimum public shareholding or MPS of 25 per cent.) 

 

It is observed 'public' shareholding has increased in line with increase in number of shareholders in the past four years. The details are given in the above exhibit.

 

The number of public shareholders in these stocks has gone up substantially in the past four years. For example, between end-Mar2020 and end-Mar2024, the number of public shareholders in Bharat Electronics has risen from 2.9 lakh to 13.6 lakh, a stupendous rise of 376 per cent.

 

In Ircon International, the number has gone up from 68,000 to 9.3 lakh, a staggering rise of 1,276 per cent in the same period.

On top of the big surge in number of shareholders, some of the stocks are afflicted with low float. 

3. Low free float stocks

Free float is defined as the number of equity shares of a particular listed 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 and their strategic partners with controlling interest.

 

The combination of rising number of shareholders and low free float is problematic for stock prices.

 

There is enough anecdotal evidence to suggest retail investor frenzy may cause share prices to move up sharply and eventually the prices tend to fall -- this phenomenon is strikingly more noticeable in companies with suspect fundamentals (the author doesn't have any data to prove that increase in number of retail shareholders directly leads to rise and eventual fall in share prices).

 

Increase in public shareholding implies a concomitant decline in institutional shareholding.

The shareholding pattern of listed companies can be gleaned from data published by stock exchanges, namely, BSE and NSE.

 

Several PSBs have less than 25 per cent "minimum public shareholding" (as defined by SEBI -- see Section 2 above for more). With lower free float, it is easier for shady operators to manipulate share prices of companies.

 

There is an increase in number of shareholders of non-PSU listed stocks also, but the increase in PSU stocks is much more pronounced compared to non-PSU stocks.

In some of these companies mentioned in the above list, the institutional shareholding is meagre. Increase in number of retail shareholders blended with low institutional holding hints at market ebullience.

 

Some of these PSU stocks have cross holdings from other PSUs.

 

For example, PSUs namely, LIC of India, Indian Oil Corporation and GAIL (India) hold a total of 20 per cent stake in state-owned ONGC. 

 

If you exclude this 20 per cent, the free float in ONGC falls to 21.1 per cent -- which is less than the minimum prescribed by the regulator.
 
Free float in Mazgaon Dock Shipbuilders is only 15.2 per cent.

Punjab & Sind Bank free float is only 1.75 per cent of the total equity shares. One cannot understand why India's capital market regulator is lenient to such transgressions of mandatory norms. 

It may be mentioned Government of India, in financial year 2020-21, infused capital of Rs 5,500 crore into Punjab & Sind Bank resulting in the increase in government's stake to 97.1 per cent as of 31Mar2021.
 

Central Bank of India's free float is only 7 per cent, of which LIC holds 2.6 per cent. So, practically the free float in Central Bank of Inia is only 4.4 per cent.

 

In addition to LIC holding of 2.2 per cent, other government entities hold 4.3 per cent in NLC India -- effectively bringing down the free float.

Higher promoter shareholding of more than 75 per cent leads to lower free float for trading in markets from liquidity point of view. The higher the minimum public shareholding, the better for non-promoter shareholders to trade in those shares. 

Liquidity in securities is a sine qua non for financial markets.
 

There are so many variables that affect stock prices and markets, so one should not focus too much on a single parameter like low float or increased number of retail shareholders.

 

However, given the steep rise in stock prices in recent years, higher number of retail shareholders, low free float (at least in some PSUs), inherent inefficiency of PSU managements, lack of operational independence, government's constant interference, bloated staff, onerous pension commitments, government usage of PSUs for extracting money via dividends and buybacks, and other factors, investors need to be cautious of the PSU stocks. 

 

Some of these PSU companies may have sound business models or they may be monopoly businesses.
 

However, investors cannot ignore the indicators of market exuberance or at least they should not over expose themselves to stocks of state-owned enterprises.

4. Wrap up

The blog aims to bring to the notice of PSU retail investors the risks involved with stocks having low free float and rising number of retail shareholders.

 

There is no gainsaying the PSU stocks have been re-rated (meaning they are enjoying higher price-earnings multiples now compared to their historical valuations) due to a combination of momentum, better fundamental performance in recent years, rising investor sentiment and general market optimism.

 

A country's prime minister talking up PSU / railways stocks is an area of concern. This may be a good enough reason for investors to be bearish on PSU stocks. At times, markets are funny and brutal.
 

Without doubt, Indian stocks offer potential for returns for investors who hold them with patience for long periods of five to 10 years.

 

However, Indian stock market is at elevated levels on several parameters. Stocks that have gained the most are likely to be the biggest losers if and when the sentiment turns in Indian stocks.

(Disclaimer and disclosure: this should not be considered as a recommendation or investment advice; the author does not have any direct ownership in listed PSU stocks currently)

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References and additional data:

 

Top image: AI-generated image from Google Gemini

 

Tweet dated 21Jan2018 - 51% shareholding by government 

Securities Contracts (Regulation) Rules, 1957 - PDF accessed 08Jun2024

SEBI study on individual traders trading activities - 90% of individuals make losses

Increasing number of shareholders

 

Abakkus Investments - PSU stocks loss (screenshot)  

 

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RBI's Record Surplus Transfer to Govt of India 

 

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Weblinks and Investing

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Disclosure:  I've got a vested interest 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. 

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