ABSL Nifty Smallcap 50 Index Fund Review

Published: March 15, 2021 at 10:57 am

Aditya Birla Sun Life Nifty Smallcap 50 Index Fund is an open-ended scheme tracking Nifty Smallcap 50 total return Index. In this review, we find out if investors considering this index would get anything different or extra compared to existing index funds like NIfty Midcap 150 or Nifty Next 50.

The AMC is also launching the ABSL Nifty Midcap 150 Index Fund at the same time. We have already twice reviewed similar index funds and established that investors are better off with a Nifty Next 50 index fund. Therefore we will not review this fund.  The interested reader can consult: Motilal Oswal Nifty Midcap 150 Index Fund: Should you invest? And Nippon India Nifty Midcap 150 Index Fund Review and Should I start a SIP in Midcap 150 Index fund for diversification?

Let us first consider the AMC’s claims and why they think a Smallcap 50 index fund is worthy of consideration.

  1. The scheme one-pager opens with the claim: “Investing in smallcap opportunities could lead to big accomplishments in the long run.”
  2. The fund campaign page says, ” tracking the top small cap 50 companies, lends a combination of focus yet diversification with liquidity to the portfolio.”
  3. “Allows investors to invest in emerging companies that operate in high growth sectors.”
  4. “Balancing of risk with growth potential: Opportunity to invest in companies that can achieve accelerated growth by taking advantage of the favourable economic environment.”
  5. The campaign page also has a graph with the claim “Mid & Small Caps Outperform in every Economic Recovery,” This graph uses Nifty Midcap 100 and Nifty Smallcap 100 – not the indices on offer!!

Claims no 1 & 5: We have already established that small cap and mid cap index investing is not always favourable compared to large caps: Large Cap vs Mid Cap vs Small Cap Funds: Which is better for long term investing?

This since inception comparison of Nifty Smallcap 50 TRI vs Nifty Next 50 TRI needs no explanation!


Nifty Smallcap 50 TRI vs Nifty Next 50 TRI compared since inception
Nifty Smallcap 50 TRI vs Nifty Next 50 TRI compared since inception.

Claim no 2: Will investing in ABSL Nifty Smallcap 50 Index Fund and not say the Motilal Oswal Nifty Smallcap 250 Index Fund provide better “focus” – AMCs would keep saying this without ever quantitatively defining it!

Nifty Smallcap 50 TRI vs Nifty Smallcap 250 TRI

The five-year and ten-year rolling returns of the Nifty Smallcap 50 Index vs the Nifty Smallcap 250 Index (all analysis with total returns) are shown below.

Five year rolling returns of Nifty Smallcap 50 TRI vs Nifty Smallcap 250 TRI
Five-year rolling returns of Nifty Smallcap 50 TRI vs Nifty Smallcap 250 TRI
Ten year rolling returns of Nifty Smallcap 50 TRI vs Nifty Smallcap 250 TRI
Ten-year rolling returns of Nifty Smallcap 50 TRI vs Nifty Smallcap 250 TRI

Clearly, there is nothing special in selecting “50 small cap stocks out of a universe of 250 stocks”. Yes, it would help the fund manager reduce tracking errors, but Smallcap 50 index has consistently underperformed the Smallcap 250 index.

Claims no 3 and 4: In a market-cap weighted index fund, the index curator makes no special effort to choose “high growth sectors” or choose stocks that take “advantage of the favourable economic environment”. They look at the past market capitalization (price movement + shares outstanding + liquidity) and pick stocks.

Nifty Smallcap 50 TRI vs Nifty Next 50 TRI vs Nifty Midcap 150 TRI

The 5,7, and 10-year rolling return data for Nifty Smallcap 50 TRI (yellow), Nifty Next 50 TRI (brown), Nifty Midcap 150 TRI (pink) is shown below. Nifty Smallcap 250 TRI (green) is also included for comparison.

Notice how the pink and brown lines fall close to each other. This is why Nifty Midcap 150 TRI is not necessary. Nifty Next 50 will get the job done.

Five year rolling returns of Nifty Smallcap 50 TRI vs Nifty Smallcap 250 TRI vs Nifty Next 50 TRi vs Nifty Midcap 150 TRI
Five-year rolling returns of Nifty Smallcap 50 TRI vs Nifty Smallcap 250 TRI vs Nifty Next 50 TRi vs Nifty Midcap 150 TRI
Seven year rolling returns of Nifty Smallcap 50 TRI vs Nifty Smallcap 250 TRI vs Nifty Next 50 TRi vs Nifty Midcap 150 TRI
Seven-year rolling returns of Nifty Smallcap 50 TRI vs Nifty Smallcap 250 TRI vs Nifty Next 50 TRi vs Nifty Midcap 150 TRI
Ten year rolling returns of Nifty Smallcap 50 TRI vs Nifty Smallcap 250 TRI vs Nifty Next 50 TRi vs Nifty Midcap 150 TRI
Ten-year rolling returns of Nifty Smallcap 50 TRI vs Nifty Smallcap 250 TRI vs Nifty Next 50 TRi vs Nifty Midcap 150 TRI

Nifty Next 50 TRI also tends to beat Nifty Smallcap 50 TRI comfortably.

In summary, we recommend that investors avoid both the NFOs from ABSL: ABSL Nifty Smallcap 50 Index Fund and ABSL Nifty Midcap 150 Index Fund.  All they need is a Nifty Next 50 index fund.  They can combine Nifty and Nifty Next 50 in different ways to create large-cap or midcap-tilted portfolios.

Also, see:

 

Do share if you found this useful

We now publish both equity fund and debt fund (+ hybrid fund) screeners each month!
Use our Robo-advisory Excel Template for a start-to-finish financial plan! Now with a new demo video!  More than 415 investors and advisors use this!
Unlock the secrets of successful financial advisors and entrepreneurs with our new course!
My new book for kids: “Chinchu gets a superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both boy and girl version covers of Chinchu gets a superpower.
Most investor problems can be traced to a lack of informed decision making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, if we had to groom one ability in our children that is key not only to money management and investing but for any aspect of life, what would it be? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parent’s plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Did you know? We have more than 1000+ videos on YouTube to explore! Join our YouTube Community!

Join our courses in exclusive Facebook Groups!

  • 550+ members are now part of our new course: How to get people to pay for your skills! (watch 1st lecture for free). Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show how to achieve by showcasing your skills and building a community that trusts you and pays you!
  • Goal-based portfolio management! Join 2220+ members and get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free!  One-time payment of Rs. 3000 only. No recurring fees! Life-long access to videos (10+ hours content)  in an exclusive Facebook Group! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.

Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish mutual fund screeners and momentum, low volatility stock screeners .every month.
About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations based on money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. For speaking engagements, write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions, seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)
Free android apps