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HomeMutual FundNifty Next 50 outshines Nifty 50 by 41%

Nifty Next 50 outshines Nifty 50 by 41%

Last Updated on May 29, 2024 at 10:28 am

Over the past few weeks, more and more investors have asked us, “Is this a good time to invest in a Nifty Next 50 index fund?” A discussion. The revival in interest is because of recent outperformance. Over the last year, Nifty Next 50 outperformed Nifty 50 by 41%!

Long-term readers may know that we have been recommending Nifty Next 50 as a portfolio sidekick since 2016 – Evaluating the Nifty Next 50 as an Index Fund. Since its inception in 2017, it has been part of Plumbline, our handpicked mutual funds.

Having established that it is way more volatile than the NIfty 50 and just as volatile as the Midcap 150, we have repeatedly pointed out that it can be a frustrating index to hold and can underperform the Nifty 50 for several years.

As usual, these remarks were ignored when Nifty Next 50 was doing exceedingly well because this was all that most investors saw.

Comparison of Nifty 50 TRI and Nifty Next 50 TRI from Nov 2002 to Jab 2018
Comparison of Nifty 50 TRI and Nifty Next 50 TRI from Nov 2002 to Jab 2018

Then, after they invested, this is what they got.

Comparison of Nifty 50 TRI and Nifty Next 50 TRI from June 2019 to Nov 2023
Comparison of Nifty 50 TRI and Nifty Next 50 TRI from June 2019 to Nov 2023

Then came frustration, criticism for recommending the index, and the inevitable: Investors lose interest in Nifty Next 50 index funds.

So why is this revival in interest? They see this.

Comparison of Nifty 50 TRI and Nifty Next 50 TRI from Nov 2023 to May 2024
Comparison of Nifty 50 TRI and Nifty Next 50 TRI from Nov 2023 to May 2024

Or perhaps they see this.

Comparison of Nifty 50 TRI and Nifty Next 50 TRI from Nov 2002 to May 2024

To make similar plots, you can use our new release: A simple plotting tool to compare MFs, Indices, Stocks, Gold etc.

Or perhaps they are looking at the trailing returns. The 1Y 41% outperformance can be seen below

Tenure NIFTY 50 – TRI (%) NIFTY NEXT 50 – TRI (%)
1 Year 25.2365 66.4738
2 Years 19.7620 35.6978
3 Years 15.7363 23.7673
4 Years 26.7178 32.5699
5 Years 15.3157 21.1030
6 Years 15.0705 16.6407
7 Years 14.6522 16.0788
8 Years 15.2238 18.2473
9 Years 13.2859 16.2182
10 Years 13.4818 17.3339
11 Years 14.2141 18.1555

If your interest in Nifty Next 50 has revived, please recognise the index’s nature. It will outperform from time to time and underperform from time to time. You would feel great when it outperforms and awful when it underperforms.

If you want those so-called “long-term benefits, ” you must endure years of poor performance. If you are not ready, do not invest. And, by the way, never base your investment decisions on recent underperformance or outperformance.

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