Last Updated on August 22, 2022 at 11:28 pm
In this article, we present results from an analysis of the NIfty 50 portfolio over the last ten years. We find that the weight of the top five stock is currently the highest and six stocks dominate the top five positions.
We use the portfolio of Nippon India ETF Nifty BeEs as a proxy for the Nifty 50. Therefore the weights in the analysis only approximately mirror that of the Nifty due to expenses and tracking errors.
The six stocks that repeatedly figure in the top five of the NIfty are: (top five here means stocks with the top five weights). Recall the NIfty is a market-cap-weighted index. Higher the market cap, higher the weight. To learn more about how the Nifty is computed, see: Nifty 50 stocks with weights for October 2020
- Reliance Industries Ltd. (RIL)
- HDFC Bank Ltd.
- Infosys Ltd.
- ICICI Bank Ltd.
- ITC Ltd.
- Housing Development Finance Corporation Ltd.
Out of the 119 months studied, the no of times each stock has figured in the top five is tabulated below.
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| Stock | No of months in the top 5 out of 119 months |
| Reliance Industries Ltd. | 104 |
| HDFC Bank Ltd. | 91 |
| Infosys Ltd. | 109 |
| ICICI Bank Ltd. | 74 |
| ITC Ltd. | 98 |
| Housing Development Finance Corporation Ltd. | 110 |
Historical weights of top five Nifty 50 stocks
The following series of graphs show the historical weights of the above six stocks from Oct 2010 to Sep 2020.
Reliance Industries Ltd.
HDFC Bank Ltd.
Infosys Ltd.
ICICI Bank Ltd.
ITC Ltd.
Housing Development Finance Corporation Ltd.
The weights to a large extent reflect the fortunes of individual stock prices. We had earlier pointed out the return difference of Nifty 50 vs Nifty 50 Equal-weight index was at an all-time high! The March 2020 market crash destroyed two-year imbalance among Index stocks, but the problem quickly surfaced again: Do index fund returns depend upon just a few stocks (Concentration risk)?
The effect of just a few stocks doing well can be clearly seen from the total weight of the top five stocks which is currently the highest over the last ten years.
Index investors do not have to worry about these results. However, they must expect lower performance when the weights of the top few stocks decreases and the market homogenises at some unknown time in future.
In the last ten years, only 61 stocks have been part of the 50-stock index reflecting the reasonable stability of this stock universe and why this should be core part of a mutual fund or stock portfolio. More about the stocks that have left/entered the index in another article. If you would like to purchase this ten-year portfolio history in Excel format, you can contact me: letters [AT] freefincal.com
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