In this article, we address the concerns of many readers who want to know if they should exit Nifty Next 50 index funds or ETFs because of the looming Adani crisis.
As of Jan 31st 2023, the Nifty Next 50 holds three Adani stocks.
- Adani Green Energy Ltd. 1.73%
- Adani Transmission Ltd. 2%
- Adani Total Gas Ltd. 2.35%
So that is a total of 6.08%. Nineteen stocks have a higher weight than Adani Total Gas. So just Adani stocks alone cannot control the returns of the index.
The index needs no help from Adani stocks to underperform. It has been doing that quite well on its for a while now! The 10-year rolling returns of Nifty Next 50 TRI and Nifty 50 TRI are shown below.
Please note that this is before expenses! After expenses, Nifty Next 50 has most likely underperformed over the last ten years or is just about hanging on to dear life. Now does that mean you should exit?
That depends on your expectations and the research you did before entering. If you look at the graph above, you can see that the extra gains of Nifty Next 50 have periodically evaporated. So the current phase of underperformance is nothing new for Nifty Next 50. It has done that before.
We cannot hope to beat the Nifty 50 without taking on risk, and that risk has implications. If you were unaware of those implications before, you probably should exit as many have – Investors lose interest in Nifty Next 50 index funds.
If you can appreciate this risk and are willing to wait it out, that is fine too. Either way, I don’t think investors need to exit Nifty Next 50 because of its Adani exposure. Still, if it affects your sleep, then do exit.
However, be warned that nothing good ever comes from an investor peeking into a mutual fund portfolio, especially a passive portfolio. There will always be some scandal or the other to hit index stocks. They will move out, move back in etc. We have no control over it.
When Nifty Next 50 is doing well, investors claim that the index has future large caps in it. When it is not doing well, investors claim it is a dump yard for discarded large cap stocks.
Unlike the Nifty 50, the Nifty Next 50 is almost an equal-weighted index. This cuts both ways. If it gains, it gains big or the other way around. Investors not ready for such a ride should exit, Adani crisis or no Adani crisis.
Do share this article with your friends using the buttons below.
🔥Enjoy massive discounts on our courses and robo-advisory tool! 🔥
Use our Robo-advisory Excel Tool for a start-to-finish financial plan! ⇐ More than 1000 investors and advisors use this!
- Follow us on Google News.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Join our YouTube Community and explore more than 1000 videos!
- Have a question? Subscribe to our newsletter with this form.
- Hit ‘reply’ to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Explore the site! Search among our 2000+ articles for information and insight!
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation for promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu gets a superpower!” is now available!
Most investor problems can be traced to a lack of informed decision-making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. – Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low volatility stock screeners.
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.
Your Ultimate Guide to Travel
This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)
