Groww gets SEBI nod to launch first index fund.
Did you know that the Nifty Total Market index is a combination of all the stocks from the Nifty 500 and Nifty Microcap 250 indexes? This means it includes all types of stocks, from large-cap to micro-cap.
Groww Mutual Fund has successfully obtained SEBI’s approval to launch its inaugural index fund, the Groww Nifty Total Markets Index Fund.
The fund will follow the Nifty Total Markets Index, a broad market index encompassing all stocks listed on the National Stock Exchange (NSE).
Groww Nifty Total Markets Index Fund’s NFO opens on September 15 and closes on September 22, 2023, With a minimum investment of just ₹500.
Groww Nifty Total Markets Index Fund marks the company’s entry into the mutual fund arena, offering an affordable option for those looking to invest in the Indian stock market.
What is Nifty Total Market Index?
The Nifty Total Market Index monitors the progress of 750 diverse stocks in various market segments.
Did you know that the Nifty Total Market index is a combination of all the stocks from the Nifty 500 and Nifty Microcap 250 indexes? This means it includes all types of stocks, from large-cap to micro-cap.
The index weights stocks based on their free-float market cap. And the index is rebalanced semi- Annually.
The Nifty Total Market Index started with a NAV of 1000 on April 1, 2005.
What is the Nifty 500 Index?
The Nifty 500 Index is a large-cap index that includes the top 500 stocks listed on the NSE. The index was launched in 1996 and has a base date of January 3, 1996. The stocks in the index are weighted according to their market capitalization.
Comparison of Portfolios
The Nifty Total Market Index has a much wider portfolio than the Nifty 500 Index. The Nifty Total Market Index includes stocks from all market capitalizations, while the Nifty 500 Index doesnot includes micro-cap stocks.
The fact is clear that the top 10 sectors in both indices are precisely the same, with nearly identical weights of 84%. This is solely because the Nifty Total Market Index encompasses all the stocks in the Nifty 500 Index.
Nifty Total Market Vs Nifty 500 Rolling Returns
3 Year Rolling Returns:
- ✅ The average returns for Nifty Total Market TRI are higher (12.83%) than Nifty 500 TRI (12.62%).
- ✅ The maximum return for Nifty Total Market TRI is slightly higher (38.5%) than Nifty 500 TRI (38.3%).
- ❌ The minimum rolling return for Nity Total Market TRI (-9.6%) is slightly below Nifty 500 TRI (-9.5%).
5 Year Rolling Returns:
- ✅ The average returns for Nifty Total Market TRI are higher (12.50%) than Nifty 500 TRI (12.28%).
- ✅ The maximum return for Nifty Total Market TRI is slightly higher (22.54%) than Nifty 500 TRI (22.46%).
- ❌ The minimum rolling return for Nity Total Market TRI (-1.63%) is slightly below Nifty 500 TRI (-1.54%).
10 Year Rolling Returns:
- ✅ The average returns for Nifty Total Market TRI are higher (12.62%) than Nifty 500 TRI (12.34%).
- ✅ The maximum return for Nifty Total Market TRI is slightly higher (18.42%) than Nifty 500 TRI (18.05%).
- ✅ The minimum rolling return for Nity Total Market TRI (5.17%) is slightly below Nifty 500 TRI (4.98%).
In summary, for 3,5 and 10-year rolling returns, Nifty Total Market TRI outperformed Nifty 500 TRI in terms of average returns with a negligible difference, and the maximum returns were also slightly higher.
This means even if you invest in Nfty 500 or Nifty total return market, you will experience similar returns in future.
Nifty Total market Vs Nifty 500 Risk Paramaters
Even though Nifty 500 occasionally delivered slightly lower returns than Nifty Total Market, it's justified because it tends to be less volatile.
✅If you look at the standard deviation (Std) for 5 and 10 years, it's lower for Nifty 500 compared to Nifty Total Market.
✅The Sharpe ratio, which accounts for risk, is similar for 5 years and only slightly lower for 10 years, indicating the risk is manageable.
Groww Nifty Total Market Index yearly returns
Nifty Total Market underperformed Nifty 500 in several years, including 2008, 2011, and 2018,2019. This suggests that during these years, the broader market represented by Nifty 500 outperformed Nifty Total Market market index fund.
The pattern of underperformance suggests that during economic stress or market downturns, Nifty Total Market had lower returns compared to Nifty 500. This is primarily due to the inclusion of micro-cap stocks in the Nifty Total Market index.
However, it's worth noting that the return difference between both indices during bull and bear markets is not substantial, thanks to the significant overlap in sectors, accounting for about 85% of the similarity in performance.
Conclusion
Over the long term, both indices show a similar balance between risk and returns. The minor differences in returns are not significant enough to sway the decision. Whether you invest in Nifty 500 or Nifty Total Market index fund, you can feel confident in your choice.
You can confidently choose either one for your investment, but there's no need to hold both in your portfolio since it won't likely boost your returns. So, pick one that suits your goals and stick with it.
Mutual fund investments are subject to market risks. Please read all scheme related documents carefully. Past performance of any scheme is not necessarily indicative of future performance.
