The Nifty Microcap 250 Index: Your Ticket to High Returns
In the world of mutual funds, investors are always on the lookout for promising investment opportunities that can offer significant returns. One such opportunity is the Nifty Microcap 250 Index.
As a mutual fund expert, I firmly believe that the Nifty Microcap 250 Index holds immense potential for investors seeking to capitalize on the growth of microcap companies in the Indian market.
In this article, we will dive into the performance of the Nifty Microcap 250 Index, highlighting its unique features and discussing why it has become an attractive investment avenue for both seasoned and novice investors alike.
What is the Nifty Microcap 250 Index?
The Nifty Microcap 250 Index is a stock market index that tracks the performance of the 250 Mirco companies listed on the National Stock Exchange (NSE) of India. The index was launched in 2005, and it is rebalanced semi-annually.
Microcap stocks are typically small, young companies with relatively low market capitalizations. They tend to be more volatile than larger companies, but they also have the potential for higher returns.
The Nifty Microcap 250 Index can be a good investment for investors who are looking for exposure to Micro-cap companies. However, it is important to remember that microcap stocks are more risky than Small Cap companies, and they should only be considered as part of a diversified portfolio.
Nifty Microcap 250 Index Past Performance:
| 1 Year Rolling Returns | Nifty Microcap 250 Tri | Nifty Small cap 100 Tri |
| Total number of rolling return entries | 4272 | 4272 |
| Effective CAGR of average IRR | 24.11% | 18.22% |
| Maximum rolling return | 202.7% | 166.4% |
| Minimum rolling return | -76.0% | -71.8% |
| Chance of fund beating index | 64.98% | |
| Total number of Avergae return entries | 2 | 2 |
| Average Returns | 42.21% | 29.30% |
| Standard deviation of average returns | 17.4% | 15.3% |
| Alpha | 10.7% | |
| Sharpe ratio | 2.01 | 1.44 |
| R squared | 94.16% |
Nifty Microcap 250 Index has delivered a notable CAGR return of 24.11%, surpassing the Nifty Smallcap 100 Index’s return of 18.22%.
Furthermore, the maximum returns of the Nifty Microcap 250 Index stand at an impressive 202.7%, which is 36% higher than the Nifty Smallcap 100 Index.
However, it is crucial to note that the index also carries a higher level of risk, as evidenced by its minimum returns of -76%.
This suggests that the Nifty Microcap 250 Index may not be suitable for conservative or moderate-risk investors.
| 3 Year Rolling Returns | Nifty Micro Cap 250 | Nifty Small Cap 100 |
| Total number of rolling return entries | 3772 | 3772 |
| Effective CAGR of average IRR (approximately same as average XIRR) | 17.14% | 11.25% |
| Maximum rolling return | 62.92% | 44.9% |
| Minimum rolling return | -24.7% | -19.9% |
| Chance of fund beating index (with rolling XIRR data) | 57.77% | |
| Total number of Aevrgae return entries | 2 | 2 |
| Average Returns | 51.54% | 34.08% |
| Standard deviation of average returns | 23.2% | 20.8% |
| Alpha | 17.6% | |
| Sharpe ratio | 1.91 | 1.29 |
| R squared | 79.75% |
The three-year rolling returns of the Nifty Micro Cap 250 Index are remarkably impressive.
The average returns over this period stand at 17.17%, surpassing the Nifty Small Cap 100 Index’s average returns of 11.25%.
Moreover, the maximum returns of the Nifty Micro Cap 250 Index reach an impressive 62.92%, outperforming the Nifty Small Cap 100 Index’s maximum returns of 44.9%. This indicates that the Micro Cap index has demonstrated exceptional performance during bull markets.
On the other hand, the minimum returns of the Micro Cap index are -24.7%, slightly lower than the Nifty Small Cap 100 Index’s minimum returns of -19.9%.
This tells that if you invest in Nifty Micro cap for any 3 years time period your returns can range from -24.7% to 62.92% so you might see days with -24% returns also days with 62% returns and in between returns some days. Therefore, investing in the Nifty Micro Cap 250 Index entails experiencing both negative and highly positive returns, making it a volatile investment option.
| 5 Year Rolling Returns | Nifty Micro Cap 250 | Nifty Small Cap 100 |
| Total number of rolling return entries | 3283 | 3283 |
| Effective CAGR of average IRR (approximately same as average XIRR) | 15.72% | 10.45% |
| Maximum rolling return | 40.00% | 26.1% |
| Minimum rolling return | -12.3% | -8.4% |
| Chance of fund beating index (with rolling XIRR data) | 69.78% | |
| Total number of Aevrgae return entries | 2 | 2 |
| Average Returns | 16.76% | 9.70% |
| Standard deviation of average returns | 31.4% | 28.8% |
| Alpha | 7.0% | |
| Sharpe ratio | 0.30 | 0.09 |
| R sqaured | 88.19% |
| 10 Year Rolling Returns | Nifty Micro Cap 250 | Nifty Small Cap 100 |
| Total number of rolling return entries | 2047 | 2048 |
| Effective CAGR of average IRR (approximately same as average XIRR) | 15.96% | 10.57% |
| Maximum rolling return | 25.50% | 18.3% |
| Minimum rolling return | 3.3% | 0.6% |
| Chance of fund beating index (with rolling XIRR data) | 93.65% | |
| Total number of Aevrgae return entries | 2 | 2 |
| Average Returns | 25.84% | 15.34% |
| Standard deviation of average returns | 27.8% | 26.3% |
| Alpha | 10.6% | |
| Sharpe ratio | 0.67 | 0.31 |
| R sqaured | 87.28% |
Over a ten-year period, the Nifty Micro Cap 250 Index has shown a rolling average ranging from 3.3% to 25.50%. This indicates that there is a possibility of achieving returns as high as 25% for investors who hold their investment in the micro cap index for ten years. However, it’s important to note that the likelihood of achieving such high returns is relatively low.
On average, investors can expect returns of around 15.96% from the Nifty Micro Cap Index over a ten-year investment horizon. This means that while there is potential for significant returns, it is more realistic to anticipate returns in the range of 15.96% rather than aiming for the maximum potential return of 25%.
Nifty Micro cap 250 Average Returns
| Index | 1Y | 3Y | 5Y | 10Y |
| Nifty Micro cap 250 | 42.21% | 23.2% | 16.76% | 25.84% |
| Nifty Small Cap 100 | 29.30% | 20.76% | 9.70% | 15.34% |
The average returns of the Nifty Microcap 250 Index over different time periods, such as 1 year, 3 years, 5 years, and 10 years, are indeed impressive compared to the Nifty Small Cap 100 Index or other actively managed small-cap mutual funds.
However, it’s important to understand that the likelihood of achieving the exact same returns as the average returns is very low. Unlike rolling returns that consider multiple data points, returns are calculated based on only two data points, which reduces the probability of getting the similar returns.
In simpler terms, there is only a 1% chance of experiencing the exact same returns as the average returns. While the average returns provide an indication of the potential performance, it’s unlikely to achieve them precisely due to various factors and market dynamics.
Nifty Micro cap 250 Yearly Returns
| Year | Nifty Mirco Cap 250 | Nifty Small Cap 100 |
| 2006 | 14.86% | 47.63% |
| 2007 | 113.85% | 89.28% |
| 2008 | -74.85% | -70.59% |
| 2009 | 121.63% | 110.32% |
| 2010 | 13.22% | 18.96% |
| 2011 | -40.73% | -33.06% |
| 2012 | 44.00% | 38.54% |
| 2013 | -5.19% | -6.95% |
| 2014 | 105.66% | 56.62% |
| 2015 | 25.94% | 8.21% |
| 2016 | 3.78% | 3.19% |
| 2017 | 75.62% | 60.23% |
| 2018 | -27.11% | -28.36% |
| 2019 | -23.54% | -8.54% |
| 2020 | 38.35% | 22.77% |
| 2021 | 77.93% | 60.70% |
| 2022 | 9.66% | -12.82% |
| 2023 | 16.42% | 11.49% |
When we analyze the yearly returns, we find that the Nifty Microcap 250 Index has outperformed the Nifty Small Cap Index in 13 out of 18 years. However, it’s important to note that during the years when the Microcap index underperformed, the negative returns were quite significant. These high negative returns can be challenging for average or inexperienced investors to handle.
While the Nifty Microcap 250 Index has shown impressive returns historically, it is accompanied by high volatility. Therefore, it is advisable for investors to have a well-diversified portfolio to mitigate the risk associated with investing solely in the Microcap index. By spreading investments across different asset classes, investors can reduce the impact of any negative performance in a single investment and potentially achieve a more stable overall return.
