Nifty 50 Index Vs Nifty 100 Index – Which is better?

Nifty 50 Index Vs Nifty 100 Index – Which is better? Is Nifty 50 plus Nifty Next 50 equal to the Nifty 100 index? Let us understand from the last 21 years of data.

As the Nifty 100 Index is the combination of the Nifty 50 Index and Nifty Next 50 Index, we by default assume that Nifty plus Nifty Net 50 is equal to the Nifty 100 Index. However, the reality is entirely different.

Refer to my latest post where I have even compared the Nifty 100 Vs Nifty 100 Equal Weight “Nifty 100 Index Vs Nifty 100 Equal Weight Index – Which Is Better?“.

What is Nifty 100 Index?

Nifty 100 is a diversified 100 stock index representing major sectors of the economy. Nifty 100 represents top 100 companies based on full market capitalisation from Nifty 500. This index intends to measure the performance of large market capitalization companies. The Nifty 100 tracks the behavior of a combined portfolio of two indices viz. Nifty 50 and Nifty Next 50.

However, it should be clarified that Nifty 100 is not simply half of Nifty 50 and half of Nifty Next 50. Upon examining the current components of Nifty 100, it becomes apparent that approximately 77% of the stocks in Nifty 100 are sourced from the Nifty 50 Index, while the remaining 23% are derived from the Nifty Next 50 Index.

Therefore, despite the fact that Nifty 100 includes stocks from both Nifty 50 and Nifty Next 50, the distribution of weightage is not equal. In fact, it is significantly skewed towards the Nifty 50. The Nifty 50’s top 10 stocks alone account for approximately 45% of the total weightage in Nifty 100.

Nifty 50 Index Vs Nifty 100 Index – Which is better?

Now, let us try to understand which is better between the Nifty 50 Index Vs Nifty 100 Index.In order to gain a better understanding, let’s analyze the data from the past 21 years. I have chosen this timeframe as the base date for the Nifty 100 is 1st Jan 2003. Therefore, we will focus on studying the Nifty 50 TRI, Nifty Next 50 TRI, and Nifty 100 TRI. Throughout this period, we have a total of 5336 daily data points.

Given that the base date for Nifty 100 is 1st Jan 2003, let’s analyze the performance of Nifty 50 TRI, Nifty Next 50 TRI, and Nifty 100 TRI by considering an investment of Rs.1,00,000 in each of these indices.

Lumpsum Investment of Rs.1 lakh in Nifty 50 TRI Vs Nifty Next 50 TRI Vs Nifty 100 TRI

Upon examining the trends and present figures, it is evident that the Nifty Next 50 TRI Index appears to be performing exceptionally well. However, it is imperative that we refrain from making assessments solely based on specific returns. It is crucial to analyze the drawdowns of these indices initially, followed by an examination of the rolling returns.

Drawdown refers to the decline in the value of an investment or portfolio from its peak to its lowest point over a specific period. It is a measure of downside risk, indicating how much an investor could potentially lose from the highest point before the value recovers.

Drawdown of Nifty 50 TRI Vs Nifty Next 50 TRI Vs Nifty 100 TRI

The Nifty Next 50 TRI Index exhibits significantly higher volatility when compared to both the Nifty 50 TRI and Nifty 100 TRI. This highlights the importance of not solely relying on returns when making investment decisions.

Let us now look into the rolling returns of 1 Yr, 3 Yrs, 5 Yrs, and 10 Yrs.

# 1 Year Rolling Returns of Nifty 50 TRI, Nifty Next 50 TRI and Nifty 100 TRI

1 Yr Rolling Returns of Nifty 50 TRI Vs Nifty Next 50 TRI Vs Nifty 100 TRI

In terms of the yearly rolling return data of 5088, the Nifty 100 TRI Index has outperformed the Nifty 50 TRI Index for approximately 47% of the time. On the other hand, the Nifty Next 50 TRI Index has outperformed the Nifty 50 TRI Index by 54%. This indicates that whenever the Nifty Next 50 has outperformed the Nifty 50, the Nifty 100 has also outperformed the Nifty 50. This observation is clearly depicted in the provided image.

# 3 Years Rolling Returns of Nifty 50 TRI, Nifty Next 50 TRI and Nifty 100 TRI

Nifty 50 Index Vs Nifty 100 Index 3 Yrs Rolling Returns

It should be observed that the Nifty 50 TRI and Nifty 100 TRI are performing at the same level. But, whenever the Nifty Next 50 TRI surpasses or falls behind, the distinction becomes apparent. Nifty 100 TRI outperformed the Nifty 50 TRI for around 42% times and Nifty Next 50 TRI outperformed the Nifty 50 for around 54%.

# 5 Years Rolling Returns of Nifty 50 TRI, Nifty Next 50 TRI and Nifty 100 TRI

5 Yrs Rolling Returns of Nifty 50 TRI Vs Nifty Next 50 TRI Vs Nifty 100 TRI

For 5 years rolling returns also, the results are similar of what they were for 1 year and 3 years rolling returns.

# 5 Years Rolling Returns of Nifty 50 TRI, Nifty Next 50 TRI and Nifty 100 TRI

10 Yrs Rolling Returns of Nifty 50 TRI Vs Nifty Next 50 TRI Vs Nifty 100 TRI

The Nifty 100 TRI appears to be outperforming the Nifty 50 TRI due to the visible outperformance of the Nifty Next 50 TRI. However, the margin is narrow since the majority of the portfolio consists of Nifty 50 stocks rather than Nifty Next 50 stocks.

Conclusion –

  1. Nifty 100 is not equal to Nifty 50 plus Nifty Next 50 in equal terms.
  2. In Nifty 100, the major constituent is Nifty 50 and the minor constituent is Nifty Next 50.
  3. Despite being classified as a large-cap index, the Nifty Next 50 exhibits characteristics more commonly associated with mid-cap indices, such as higher volatility and returns. This makes it an appealing option for many investors when compared to the Nifty 50. However, it is important to note that investing in the Nifty Next 50 comes with a higher level of risk. (Refer to my earlier post “Nifty Next 50 Vs Nifty Midcap 150 – Which is best?“).
  4. You can easily have better control over the % of allocation by investing separately in the Nity 50 and Nifty Next 50 Index than owning the Nifty 100. However, if you want both Nifty 50 and Nifty Next 50 Index constituents in a single fund and are fine with the higher exposure of Nifty 50, then you can consider Nifty 100.
  5. I suggest a separate set up of Nifty 50 and Nifty Next 50 than owning a single Nifty 100 fund for better control over your allocation and risk management.

5 thoughts on “Nifty 50 Index Vs Nifty 100 Index – Which is better?”

  1. Anil Goud Polagani

    Hi Basu,

    As you suggested a separate set up of Nifty 50 and Nifty Next 50 than owning a single Nifty 100 fund for better control over your allocation and risk management.

    At what weight-age % would you split between Nifty 50 & Nifty Next 50 for a long term investor.

    Also can you share insights of having which combination would serve better

    1)Nifty 50/Sensex + Nifty Next 50
    2) Nifty Next 50 + Nifty LargeMidcap 250 (As portfolio overlap is 9%)

  2. Aaditya Chauhan

    For long term 25-30 years will Nifty 50 index fund give same return as Nifty Next 50 index fund ? Should I invest in one fund 100% or 50-50 ratio in Nifty 50 and Nifty Next 50 ? Which is best strategy sir.
    Thank you.
    Aaditya

    1. Dear Aaditya,
      It is hard to say that after 25-30 years both gives same returns. Understand the risk and accordingly take a call. That is most important.

  3. What about nifty 100 equal weight index fund, won’t this single fund can replace both nifty 50 and nifty next 50?

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