Investors lose interest in Nifty Next 50 index funds

Published: November 28, 2022 at 6:00 am

The Nifty Next 50 is a strange index. Although theoretically part of the large cap universe, due to large impact costs (significant difference between buy and sell price), its volatility is comparable to that of a mid cap index, as repeatedly pointed out by us: Warning! Nifty Next 50 is NOT a large cap index!

It can also be a frustrating index hold. Its returns can be below that of Nifty for extended periods, and since early 2018, we have witnessed one such phase. See: Is it time to exit from Nifty Next 50?

This and the emergence of the Midcap 150 index have displaced the Nifty Next 50 from the “top preference” list of several investors. See: Nifty Midcap 150 beats Nifty Next 50 for the first time.

We show below that AUM inflow into ICICI Nifty Next 50 has considerably reduced over the last two years. The ICICI fund is chosen as representative of all index funds tracking the index as it is one of the oldest and most popular. The corresponding fund from UTI is relatively recent and does not have enough history.

Note: We continue recommending Nifty Next 50 in our Handpicked List of Mutual Funds Oct-Dec 2022 (PlumbLine). What is presented here are some facts. This article should not be considered a recommendation to exit. We have always maintained that Nifty Next 50 is a risky index, and only those who can stomach the risk and wait for performance should invest in it.


🔥Enjoy massive discounts on our courses and robo-advisory tool! 🔥
Get free money management solutions delivered to your mailbox! Subscribe to get posts via email! (Subscribers get exclusive discounts!)
 
New Tool! => Track your mutual funds and stocks investments with this Google Sheet!

Trailing returns of Nifty 50 TRI and Nifty Next 50 TRI

BenchmarkNIFTY 50 – TRINIFTY NEXT 50 – TRI
1 Year4.06580.0190
2 Years21.478123.4428
3 Years16.846915.9794
4 Years16.123113.1722
5 Years13.59538.9029
6 Years15.577513.2028
7 Years14.517013.5779
8 Years11.712312.7490
9 Years14.654816.8132

The AUM of a fund has two contributions. One due to in- or out-flows and the other due to market-linked gains or losses. To approximate the AUM due to in/outflows, we compute the following:

Aum over NAV = Monthly Change in AUM of the fund minus the monthly change in NAV.

This removes the market-linked change from the AUM.

The AUM over NAV and NAV for ICICI Nifty Next 50 index fund is shown below.

AUM over NAV and NAV (in red, right axis) for ICICI Pru Nifty Next 50 Index Fund from Nov 2012 to Sep 2022
AUM over NAV and NAV (in red, right axis) for ICICI Pru Nifty Next 50 Index Fund from Nov 2012 to Sep 2022

The gradual drop in AUM over NAV in the run-up to the March 2020 crash. After that, there has been a marked drop, meaning investors have started investing elsewhere. They have likely left their existing Nifty Next 50 fund units as is. They are probably frustrated waiting for a turnaround and lost interest in the index.

This is AUM over NAV data for UTI Nifty Next 50 Index fund. There is a similar drop but this fund is much younger.

AUM over NAV for UTI Nifty Next 50 Index Fund
AUM over NAV for UTI Nifty Next 50 Index Fund

Our recommendation wrt Nifty Next 50 remains the same. If you wish to expand beyond Nifty 50 (there is no need to, but if that is what you desire), then Nifty Next 50 is still the most convenient, mid-cap-like passive option. However, be aware of the risks and be ready to face extended periods of poor performance. Please note that this risk warning also applies to mid cap or small cap funds (active or passive). As always, we do not recommend straying outside the Nifty top 100 universe, as the tracking errors of passive options are quite high: Not all index funds are the same! Beyond the top 100 stocks tracking errors are huge!

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses and robo-advisory tool! 🔥
Use our Robo-advisory Excel Tool for a start-to-finish financial plan! More than 1000 investors and advisors use this!
  • Follow us on Google News.
  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Join our YouTube Community and explore more than 1000 videos!
  • Have a question? Subscribe to our newsletter with this form.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Get free money management solutions delivered to your mailbox! Subscribe to get posts via email! (Subscribers get exclusive discounts!)
 
Explore the site! Search among our 2000+ articles for information and insight!

About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation for promoting unbiased, commission-free investment advice.
  Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3000 investors and advisors are part of our exclusive community! 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! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! 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 you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our 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, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? 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 parents 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!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low volatility stock screeners.
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (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 and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
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, and 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 300 (instant download)