In this article, we will be discussing the Nifty 200 Momentum 30 Index, what is it, and how does it works? Should You Invest? Get all your answers about this Index in the article, so, let’s get started.
Nifty 50 Value 20 Index:
- The NIFTY50 Value 20 Index is designed to reflect the behavior and performance of a diversified portfolio of value companies forming a part of the NIFTY 50 Index.
- The NIFTY50 Value 20 Index comprises 20 companies listed on the National Stock Exchange (NSE).
- Value companies are normally perceived as companies with low PE (Price to Earning), low PB (Price to Book), and high DY (Dividend Yield)
- At the time of quarterly rebalancing/ change in index constituents, the weightage of index constituents (where applicable) is capped at 15%. Weightage of such constituent may increase beyond 15% between the rebalancing periods
- Index values are calculated on a real-time basis.
- Companies forming the part NIFTY 50 on the construction and rebalancing date are taken into consideration for the selection of stocks
- Stocks are selected based on ROCE (Return on Capital Employed), PE, PB, and DY (Dividend Yield), and the final ranking is derived to select the value stocks from NIFTY 50.
- Ranks are assigned to all the NIFTY constituents based on each parameter i.e. Return on Capital Employed (ROCE), Price/Earnings (PE), Price/Book Value (PB), and Dividend Yield (DY). Relatively lower PE and PB receive a better rank, while higher DY and ROCE receive a better rank.
- Weights of 0.4, 0.3, 0.2, and 0.1 are assigned to ranks of ROCE, PE, PB, and Dividend Yield respectively to derive the final ranking for selection.
- The top 20 companies as per the ascending order of the final ranking are selected to form the index.
Reconstitution & Rebalancing:
- The index is reviewed annually in December.
- Companies that are IRDA dividend norms complaint shall be considered eligible to be included in the index.
- To reduce the number of rebalancing of constituents in a review, a buffer of 50% of the total number of constituents shall be applied at the time of each review.
- On a quarterly basis, indices will be screened for compliance with the portfolio concentration norms for Exchange Traded Funds (ETFs)/ Index Funds announced by SEBI on January 10, 2019
- The index is calculated using the free float market capitalization methodology and has a base date of January 1, 2009, indexed to a base value of 1000.
- This Index is having highest allocation to the Technology Sector i.e., 39% which is followed by the FMCG Sector which is having an allocation of 23% in the index. The fund is having least allocation of 2% in the Chemicals sector.
Calendar year returns are always above returns of Nifty 50 since 2013 except for the years 2015 and 2019.
Trailing returns have outperformed the benchmark index Nifty 50 every time in the given period i.e., 1-year, 3-year, 5-years, and 10-years.
- In terms of Rolling Return too, in every factor, the Nifty 50 Value 20 Index has outperformed the Nifty 50 Index in every case.
- The standard deviation of this index is around 18 whereas the standard deviation of Nifty 50 is around 22.
- The beta of this index is around .7 which is significantly low than the 1.
- The index has also generated Alpha quite very well since inception except for July 16-July 17; PE is less than Nifty 50.
How to invest in this index?
There is 4 option available to invest in this index:
What should investors do?
Overall, this Index Fund/ETFs has performed very well as compared Nifty 500 index and has not turned negative only once. It is Index/ETF focused on Nifty 50 stocks that too with a value investing approach and hence investors with a low-risk appetite can keep this index on their radar, one can choose it according to their risk-taking appetite and return expectation.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.