Nifty Next 50 Index FundDSP Mutual Fund is launching a new fund offer for DSP Nifty Next 50 Index Fund. The NFO period starts from February 11 and ends on February 15, 2019. The Nifty Next 50 Index tracks 51 to 100 stocks ranked by market cap. This index tries to capture companies which may become the mega caps of tomorrow. So, is going the index fund way the right approach to capture this compelling investment proposition? RupeeIQ tells you the pros and cons.

What is NIFTY Next 50?

The NIFTY Next 50 Index is a basket of stocks. It represents 50 companies from NIFTY 100 after excluding the NIFTY 50 companies.

The NIFTY Next 50 was introduced on January 1, 1997, with base date and base value being November 03, 1996 and 1000 respectively. The beauty of this index is that it operates in the large cap space as defined by SEBI.

The NIFTY Next 50 index is calculated online daily and index rebalancing happens once in six months. Its top constituents by weight are Britannia Industries Ltd., Godrej Consumer Products Ltd., Dabur India Ltd., Aurobindo Pharma Ltd., Lupin Ltd., Shree Cement Ltd., Marico Ltd., Piramal Enterprises Ltd., Havells India Ltd. and Bosch Ltd.

Almost 70% of the index is in four sectors – Consumer Goods (29%), Financial Services (17.5%), Pharma (13%) and Automobiles (9.2%).

Nifty Next 50 funds

Suitable for which investors

This fund is suitable for first-time investors who want to access the equity markets and those who want to meet the market at a low cost.

Investors looking for a diversified equity exposure and seasoned investors looking to add a core allocation to their portfolio would also benefit from exposure to such a fund.

Fund manager

DSP Nifty Next 50 Index Fund will be managed by Gauri Sekaria.

DSP Investment Managers launched their first fund on the passive platform in 2017, which was a one of its kind offering called the DSP Equal Nifty 50 Fund.

Peer funds

The Nifty Next 50 Index has been used by some fund-houses as a product to launch passive index funds. For instance, R*Shares Junior BeES is from Reliance Nippon Life Asset Management Ltd. The SBI ETF NIFTY Next 50 is from SBI Funds Management Ltd. The UTI NIFTY Next 50 Fund is from UTI AMC Pvt. Ltd. From Aditya Birla Sun Life MF house, there is Aditya Birla Sun Life Nifty Next 50 ETF. ICICI Prudential also has an ETF on similar lines.

Performance of peer funds

Fund 1-Month Return 3-Month Return 1-Year Return 3-Year Return 5-Year Return 10-Year Return
Aditya Birla Sun Life Nifty Next 50 ETF -4.16
ICICI Prudential Nifty Next 50 ETF -4.07 -1.77
ICICI Prudential Nifty Next 50 Index Fund -4.15 -2.02 -10.76 13.82 17.08
Reliance ETF Junior BeES -4.15 -1.84 -10.07 14.2 17.65 20.77
SBI ETF Nifty Next 50 Fund -4.15 -1.83 -10.25 14.61
UTI Nifty Next 50 Exchange Traded Fund -4.15 -1.84 -10.1
UTI Nifty Next 50 Index Fund -4.22 -2.11

RupeeIQ take – Nifty Next 50 Index fund should be used by investors as a complementary strategy along with their active exposure for meeting their goals in an effective manner. The Nifty Next 50 index has shown more volatility and higher long-term performance compared with Nifty 50. So, index fund investors must be prepared for that.

Disclaimer – Please note that investors are requested to consult their financial, tax and other advisors before taking any investment decision.

Author
Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. He can be contacted on kumarsroy@rupeeiq.com