Skip to content

Nifty Next 50: The Benchmark Index That No Mutual Fund Would Touch?!

In July 2016, while researching on the Nifty Smart Beta Indices, I accidentally realised that the Nifty Next 50 (formerly Nifty Jr) is one tough benchmark to beat. When I compiled the list of equity mutual fund benchmarks, I could not find any active mutual fund benchmarked to the Nifty Next 50! Now, if that is a fact, it is not hard to understand why. In this post, I present how mid-cap, small-cap, multi-cap and ELSS mutual funds have fared against the Nifty Next 50.

The Nifty Next 50 is the bottom 50 of the top 100 stocks by market capitalisation. The top 50 is part of the Nifty (or Nifty 50). It is indeed amusing why it is not easy to beat such a "simplistic" index composition.

I am indebted to Ankit Jain for spotting an error in the May 2017 outperformance sheet. This is the revised file: May 2017 Mutual Fund Outperformance Screener.

This time, I have used Nifty Next 50 as a benchmark for mid-caps, small-cap, multi-cap, ELSS, international funds and "others".  This is a debatable decision as one can argue that it is not an appropriate index to compare. I agree.

Since the Nifty next 50 excludes the top 50 large cap stocks, I will not compare it with large cap funds. It is not fair in my opinion. I would peg the index as a multi-cap index and it is neither a mid-cap or small-cap index.

However, it is well known that mid-caps and small caps are quite volatile. If after such ups and downs they are not able to beat the Nifty Next 50 then it may not be worth investing in them (see below though). Same is true for international funds and the "others" category funds.

Now, those who recognise the importance of an asset allocation will understand that there is no need for ELSS funds for tax planning. A comparison with Nifty Next 50 should be another reason!

Here are some comparisons.

Nifty Next 50 (price index) vs BSE Small CAP (Total returns)

Nifty-next-50-BSE-small-cap

Nifty Next 50 (price index) vs BSE Mid-CAP (Total returns)

Nifty-next-50-BSE-mid-cap

Nifty Next 50 (price index) vs Nifty Full Small CAP (price index)

Nifty-next-50-Nifty-small-cap-100

Nifty Next 50 (price index) vs BSE 200 (Total returns)

Nifty-next-50-BSE-200

While the above duration is not long enough to conclusively justify the  use of Nifty Next 50, I think you would agree that it is not a bad choice.

I present below the outperformance consistency scores wrt Nifty Next 50. A score of 50% implies that the fund has obtained better returns than the index for half the periods compared. The periods here refer to every possible 3Y, 5Y, 7Y durations (rolling returns)  between Apr (3rd) 2006 and May (2nd) 2017. For more details refer to: May 2017 Equity Mutual Fund Outperformance Screener

ELSS vs Nifty Next 50

ELSS-vs-Nifty_next-50

MId-cap funds vs Nifty Next 50

Multi-cap Fund vs Nifty Next 50

Small Cap Funds vs Nifty Next 50

You can download the data set (link above) and make your analysis.

We may rejoice that "our fund" has comfortably beat the Nifty Next 50 as on date. However, that may not be case going forward. In any case, the point is that not even 1/3

In any case, the point is that very few funds have managed to beat the index over 5Y or 7Y periods. This is quite disturbing. Of course, I have considered the nifty Next 50 without considering associated index investing expenses. But the dividends also have been ignored. The point is, all things considered, the Nifty Next 50 index is a very good one to invest in, for long term goals.

Note: I have only considered returns, not risk. An active fund managers job is not to just produce returns, but to do so by minimising risk. If you consider the downside protection (how much the funds fell when the index fell), then many of the above funds have performed reasonably well. You can check this here: May 2017 Equity Mutual Fund Screener with SIP, Lump Sum Returns (1-9Y) & Capture Ratios

Therefore DO NOT abandon your actively managed mutual fund in favour of the Nifty Next 50 without understanding risks. It is a pretty volatile index.

=-=-=-=-=-=

Kolkata DIY Investor Workshop May 28th, 2017

Register for the Kolkata DIY Investor Workshop May 28th, 2017

You Can Be Rich Too With Goal-Based Investing

You can be rich too with goal based investing is my new book with PV Subramanyam. If you have not yet got the book, check out the reviews below and use the links to buy.
Reader Quotes:

particularly useful for first time investors

Every earner should read this

Five stars. Gifted my friend. He found it very helpful

If you want a book that's unbiased and that will hold your hand and walk you through the personal finance jungle, then buy this.. the best thing 300 bucks could buy you.

Gift it to your Friends and Relatives whom you care more. Already follower of Pattu and Subra's forum. Ordered 4 more copies to give gift to my friends and eagerly waiting to read

The best book ever on Financial Freedom Planning. Go get it now!

Your first investment should be buying this book

The (nine online) calculators are really awesome and will give you all possible insights

Thank you, readers, for your generous support and patronage.

Amazon Hardcover Rs. 317. 21% OFF

Kindle at Amazon.in (Rs. 244.30) 30%

Google Rs. 307
Infibeam Now just Rs. 315 24% OFF.

If you use a mobikwik wallet, and purchase via infibeam, you can get up to 100% cashback!!

Bookadda Rs. 344. Flipkart Rs. 359

Amazon.com ($ 3.70 or Rs. 267)

  • Ask the right questions about money
  • get simple solutions
  • Define your goals clearly with worksheets
  • Calculate the correct asset allocation for each goal.
  • Find out how much insurance cover you need, and how much you need to invest with nine online calculator modules
  • Learn to choose mutual funds qualitatively and quantitatively.

More information is available here: A Beginner's Guide To Make Your Money Dreams Come True!

What Readers Say


Create a "from start to finish" financial plan with this free robo advisory software template


Free Apps for your Android Phone

Install Financial Freedom App! (Google Play Store)


Install Freefincal Retirement Planner App! (Google Play Store)


Find out if you have enough to say "FU" to your employer (Google Play Store)


About Freefincal

Freefincal has open-source, comprehensive Excel spreadsheets, tools, analysis and unbiased, conflict of interest-free commentary on different aspects of personal finance and investing. If you find the content useful, please consider supporting us by (1) sharing our articles and (2) disabling ad-blockers for our site if you are using one. We do not accept sponsored posts, links or guest posts request from content writers and agencies.

Blog Comment Policy

Your thoughts are vital to the health of this blog and are the driving force behind the analysis and calculators that you see here. We welcome criticism and differing opinions. I will do my very best to respond to all comments asap. Please do not include hyperlinks or email ids in the comment body. Such comments will be moderated and I reserve the right to delete the entire comment or remove the links before approving them.

8 thoughts on “Nifty Next 50: The Benchmark Index That No Mutual Fund Would Touch?!

  1. vmmurali2003@yahoo.com

    A very interesting insight. Thanks for sharing this wonderful article.

    Reply
  2. Vivek Gupta

    So if one is comfortable with the volatility of the mid / small cap space, investing in a Nifty Next 50 index fund would have the advantage of good returns with a lower expense ratio. But
    in comparison an actively managed fund might have better downside protection. Did I get that right?

    Reply
  3. Rahul

    I noticed that there is fund by ICICI Pru that is Nifty next 50 fund, but it is also not meeting the performance of nifty 50, what could be the reason? Appreciate your inputs on the same

    Reply
    1. freefincal

      I dont understand what "not meeting the performance of nifty 50" means.

      Reply
  4. Pingback: Read, Learn, Improve – 13-May-17 | Random Thoughts of Analyst

  5. Pingback: Read, Learn, Improve – 13-May-17 – Random Thoughts of Analyst

Do let us know what you think about the article

%d bloggers like this: