In this article, we address the concerns of many readers who want to know if they should exit Nifty Next 50 index funds or ETFs because of the looming Adani crisis.
As of Jan 31st 2023, the Nifty Next 50 holds three Adani stocks.
- Adani Green Energy Ltd. 1.73%
- Adani Transmission Ltd. 2%
- Adani Total Gas Ltd. 2.35%
So that is a total of 6.08%. Nineteen stocks have a higher weight than Adani Total Gas. So just Adani stocks alone cannot control the returns of the index.
The index needs no help from Adani stocks to underperform. It has been doing that quite well on its for a while now! The 10-year rolling returns of Nifty Next 50 TRI and Nifty 50 TRI are shown below.
Please note that this is before expenses! After expenses, Nifty Next 50 has most likely underperformed over the last ten years or is just about hanging on to dear life. Now does that mean you should exit?
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! 🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
That depends on your expectations and the research you did before entering. If you look at the graph above, you can see that the extra gains of Nifty Next 50 have periodically evaporated. So the current phase of underperformance is nothing new for Nifty Next 50. It has done that before.
We cannot hope to beat the Nifty 50 without taking on risk, and that risk has implications. If you were unaware of those implications before, you probably should exit as many have – Investors lose interest in Nifty Next 50 index funds.
If you can appreciate this risk and are willing to wait it out, that is fine too. Either way, I don’t think investors need to exit Nifty Next 50 because of its Adani exposure. Still, if it affects your sleep, then do exit.
However, be warned that nothing good ever comes from an investor peeking into a mutual fund portfolio, especially a passive portfolio. There will always be some scandal or the other to hit index stocks. They will move out, move back in etc. We have no control over it.
When Nifty Next 50 is doing well, investors claim that the index has future large caps in it. When it is not doing well, investors claim it is a dump yard for discarded large cap stocks.
Unlike the Nifty 50, the Nifty Next 50 is almost an equal-weighted index. This cuts both ways. If it gains, it gains big or the other way around. Investors not ready for such a ride should exit, Adani crisis or no Adani crisis.
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- 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.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
About The Author
Dr 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 ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), 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 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 3,000 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 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 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!
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 is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the 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 with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will 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
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published 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
This 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
This is an in-depth dive 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)