Axis MF has launched its Nifty 500 index fund, which Vikash positions very simply : if you want to buy the India growth story, the Nifty 500 is the simplest, most efficient and most cost effective way to do it.
Many investors have been traditionally investing in the Nifty 50 index as a way to buy the market. However, the growing breadth of the market means that the Nifty 50 index has steadily shrunk now to only 40% of market cap whereas the Nifty 500 index covers over 90% of market cap.
Nifty 500 covers the vibrancy of the small and midcap spaces as well as the globally growing footprint of large caps.
Nifty 500 has delivered better long term returns than Nifty 50 with comparable levels of volatility.
Axis has done an extensive study on liquidity in the bottom 100 stocks of the Nifty 500, to address liquidity concerns on small caps in bearish markets. A Rs.10,000cr AuM Nifty 500 index fund will invest at current weights, Rs. 2.5 cr in the 400th stock and Rs.62 lakhs in the500th stock. A stress test of meeting 10% redemption on a single day will also be possible to execute, given these tiny weights in the smallest stocks of the index.
Vikash suggests that new investors should commence their investment journey ideally with the Nifty 500 index fund and then venture into actively managed funds (which carry a higher risk profile) once they get comfortable with markets. First beta, then alpha – that’s the wise mantra for new investors.