Bonds

Nifty 100 index fund’s the low-cost route to bet on India’s stars


Mumbai: First-time investors looking for a single low-cost passive fund that gives them exposure to the top 100 companies can consider the Nifty100 funds. Given that valuations are rich and interest rates are expected to rise globally and in India, financial planners suggest systematic investment plans to build portfolios.

Since the NSE Nifty100 index has 100 stocks, concentration to any sector is lower compared with investing in funds that mirror the 30-stock S&P BSE Sensex or the 50-component Nifty50. “Nifty100 offers exposure to more sectors and companies over Nifty50. Concentrated sector exposure in Nifty50 gets diluted when investors move to the Nifty100,” said Kunal Valia, CIO-listed investments at Waterfield Financial & Investments.

Fore example, Nifty50 has a 36.71% exposure to banking and financial services, which reduces to 33% in the Nifty100.

A report by HDFC MF says since its existence from 2004, out of 19 years, the Nifty100 has generated positive returns in 15 years and returned an annualised 19%. Over the last year, it delivered 12.86% compared with Nifty50’s 12.2%. The Axis Nifty100 fund has been in existence since October 2019, while the new fund offers of HDFC Nifty100 and IDFC Nifty100 are currently open for subscription.

“Since it gives exposure to the top 100 companies and top sectors, it is a good starting fund for investors who like simplicity and lower cost,” said Harshvardhan Roongta of Roongta Securities.

While the Nifty50 gives exposure to 55% of total market capitalisation, it is only 15% for the Nifty Next 50. For Nifty100, it is 70%. Hence experts advise against equal allocation to the Nifty50 and the Next 50, as a substitute for the Nifty100. “It is difficult for retail investors to understand the ideal allocation between Nifty50 and Next 50, which could change as stocks move in and out the index. There are tax implications and it is difficult to rebalance,” said Anup Bhaiya, MD, Money Honey Financial.



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