The Nifty 50 stock index covers the largest 50 publicly traded companies on the India exchange. It follows the National Stock Exchange of India (NSE). Many investors would use the index to assess the overall health by growth or decline of India's economy.
Above this paragraph, you can find the current live price (read value) of the NIFTY 50 Index, ticker NSEI. Do not get discourages by its value, as investing in an index doesn't mean paying for the actual value of the index. Instead, you can invest the amount you want, which will be spread equally over a fund or ETF that mirrors the index.
NIFTY 50 Index summary
As the name implies, the index (read bucket) consists of 50 companies. Because it's an Indian-focused index, all companies are from India, which is important when you consider spreading investment risk. On the one hand, you benefit from investing in many different organizations that form the fundamentals economy of India. On the other hand, you are not exposing yourself to any other market, nor any other currency than the index/ETF listed currency.
When we think of NIFTY, we need to also consider it's 'competing' index called BSE Sensex, which you can read about as well.
Nifty 50 stock Index investing
So, you may have heard about index NIFTY already. It's a very common option for beginning and expert investors residing in India, or interested in it's economy. Let's take a quick look at why that is:
- India has the world's most stable democracy, which could be a sign of reocurring and predicatble economic growth & direction.
- Thanks to a well spoken English population, the country has become a large exporter of information, technology and software services.
- As it stands, India enjoys the benefits of 17 preferred trade agreements with other economic regions and/or countries.
On average, for 20+ years, the actual return of the Nifty 50 Index has been around 12.2% annualized. Not only has it been hard for individual investors to beat the 'stock market' (read Nifty index) in any given year, but investing consistently in NIFTY also means your returns accumulate. See the above image to understand the growth that has occured.
The great – Nifty 50 Index
As hinted towards before, this index has many ETFs, funds, and other products that follow its value. This is a major advantage as it means you can find the best solution out there based on your own preference.
Any ETF or fund charges an ongoing cost figure (OCF), which eats away at your profits. You won't notice it, but if you are savvy enough, you can prevent a high OCF from the start. Simply explore multiple ETFs to find the one with the lowest quoted costs.
Another way to prioritize is by dividend possibilities. Most derivatives from Nifty, do not offer dividends. However, you can search for 'distributed' or 'accumulated' along with Nifty 50' to find those that do! Such as iShares S&P India Nifty 50 Index Fund. When an ETF distributes, it really means you receive the money periodically. If it accumulates, it will add the dividends to its total value, thus marginally increasing its return the moment you sell.
The 'bad' side of Nifty
Lately the index has become rather volatile and could be in for a rought ride. Then again, most other indexes are suffering the same challenges.
Another consideration is that India is estimated to have between 30% and 60% of its total population using the internet. When you consider this number is significantly higher in most Asian and European countries, it makes you wonder. Could this be an opportunity, or signal most wealth is not controlled by the Indian people themselves. As always, it needs to be said that there are plenty of other markets out there with opportunities and relevant, sometimes local, financial instruments.
Lastly, when you consider threats. Being exposed to only one market & one major currency (usually USD) can also carry its own risks. Thankfully, it's easy to buy several thematic or industry-specific ETFs to counteract this. Just have a look at all the GICS possibilities.