“Nifty 500 is an all seasons fund as it includes a wide range of companies spanning large-cap, mid-cap and small-cap segments. There is no fund manager risk as it is passively managed and comes at a low cost,” said Kunal Valia, founder, StatLane.
He said the fund can be among the first choices for any investor as it offers a low-cost wealth creation opportunity.
Financial planners said the Nifty 500 scores over the Nifty 50 in the past three years. In the past one- and three-years, the Nifty 500 returned 36.98% and 19.12%, compared to the Nifty 50 return of 25.13% and 16.09%, respectively.
A report by Motilal Oswal said the Nifty 50 has higher sectoral concentration, covering only 10 sectors, while Nifty 500 covers 21 sectors with a more balanced exposure. The top 10 stocks in Nifty 50 account for 56.1% of the portfolio, while in Nifty 500 they account for 33.9%. The Nifty’s coverage of India’s listed universe has shrunk over the past 10 years and it covers 51% of India’s market-cap now, as against 59.9% in December 2013. Nifty 500 has outperformed the Nifty 50 in 14 out of 24 calendar years since 2000. The Nifty 500 tends to fall a bit more when markets crash, but it also gains more in up-trending years.
“Nifty 500 is a passive multi-cap fund, giving exposure to the Indian economy and is a good starting point for first-time investors,” said Nirav Karkera, head of research at Fisdom. He said such funds usually outperform large-cap stocks during the overall bull market and help reduce drawdowns during bear markets as compared to pure mid- and small-cap strategies.