Index Investing in Nifty 50

jamit_05

Well-Known Member
#1
Index Investing is all about investing in an Index. I choose Nifty 50 for the purpose. This thread will mostly be about managing a portfolio, and less about "discovering" companies.

My expectations in Index Investing in Nifty are that, once diversified enough (which may take over a year), the portfolio performance will be (should be) commensurate with the performance of Nifty itself. However, after some years, it will beat Nifty year after year.
 

DSM

Well-Known Member
#2
Welcome back Jamit. Nice to see you after a long time.

Happy investing. :thumb:

Index Investing is all about investing in an Index. I choose Nifty 50 for the purpose. This thread will mostly be about managing a portfolio, and less about "discovering" companies.

My expectations in Index Investing in Nifty are that, once diversified enough (which may take over a year), the portfolio performance will be (should be) commensurate with the performance of Nifty itself. However, after some years, it will beat Nifty year after year.
 

jamit_05

Well-Known Member
#3
Populating The Portfolio.

This procedure deserves an entire post.

I like good stocks at a bargain price. To fulfill the purpose, each Nifty 50 stocks will be a Buy when it touches the 52W low. Simple. I will not judge whether its a Reliance or TCS, Cipla or Adaniports, whether its heavily in debt like Tata steel and LT or debt free as Bhel.

Taking another step in the same direction, we will not be judgmental in capital allocation either. We will invest an equal amount in each company. I want to keep things very simple.

Apart from bargain hunting, this procedure also addresses an important pillar of Investing: Diversification. As a result, we are equipped to bear the risks. One risk if of a stock being ousted from the Index. In which case, we exit the stock. No discussion.

No other exits come to mind as of now. However, I feel that when a stock reaches its 52W High, it will be on my radar as a candidate to be "shuffled out". At that time, we will use prejudices.

We could purchase a Mutual Fund to fulfill our purpose, but I have a strong feeling that we will beat the best of the industry by a good margin.

I understand that Nifty is currently at its historically very high PE of 23.35. If Nifty starts to normalize towards a PE of 15 in the months to come, we will be given plenty of opportunities to buy.
 
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#4
Re: Populating The Portfolio.

Promising thread this.
My questions -- 1. What to do if a company is moved out of Nifty 50? 2. Does NSE review Nifty 50 composition at regular interval? If so when is the next review due?
 

jamit_05

Well-Known Member
#6
Getting Down To Business.

Idea Cellular
Year 2013 had a low of 102. That is the entry price.

Comments:
To give a vague idea about what kind of returns one must expect, Idea has made an all time high of 204. I expect a Nifty 50 stock to reach its all time high in the coming years (sometimes months). If this happens in 5 years, which is a strong likelihood for a well managed company which regularly generates free cash, then we get an annual compounded return of sub-20%. This meets and surpasses my expectations. (Not considering dividends).

Nothing else is on the radar as yet.
 
#7
This procedure deserves an entire post.

I like good stocks at a bargain price. To fulfill the purpose, each Nifty 50 stocks will be a Buy when it touches the 52W low. Simple. I will not judge whether its a Reliance or TCS, Cipla or Adaniports, whether its heavily in debt like Tata steel and LT or debt free as Bhel.

Taking another step in the same direction, we will not be judgmental in capital allocation either. We will invest an equal amount in each company. I want to keep things very simple.

Apart from bargain hunting, this procedure also addresses an important pillar of Investing: Diversification. As a result, we are equipped to bear the risks. One risk if of a stock being ousted from the Index. In which case, we exit the stock. No discussion.

No other exits come to mind as of now. However, I feel that when a stock reaches its 52W High, it will be on my radar as a candidate to be "shuffled out". At that time, we will use prejudices.

We could purchase a Mutual Fund to fulfill our purpose, but I have a strong feeling that we will beat the best of the industry by a good margin.

I understand that Nifty is currently at its historically very high PE of 23.35. If Nifty starts to normalize towards a PE of 15 in the months to come, we will be given plenty of opportunities to buy.
Hi

All these strategies seem to ignore one fact. Where do you park the funds when 52W L/H is not on radar ???

Investment capital doesn't come from thin air and then again go back into thin air . . .

The funds can be kept into liquid debt funds or likewise, but the RoI calculations need to account for that, without which all this becomes a paper exercise.

Buying MFs just beats the purpose of conceptualizing, creating and implementing such an elaborate scheme of things :)

Happy :)
 

jamit_05

Well-Known Member
#8
Hi
All these strategies seem to ignore one fact. Where do you park the funds when 52W L/H is not on radar ???
The funds can be kept into liquid debt funds or likewise, but the RoI calculations need to account for that, without which all this becomes a paper exercise.
Buying MFs just beats the purpose of conceptualizing, creating and implementing such an elaborate scheme of things :)
Happy :)
In the near future, the focus of this thread will be around buying scrips; sensibly populating the portfolio. Once bought, scrips wont be sold for a long time, unless they are taken out of Nifty 50.

Fund managing is still not a priority. To each his own.

Discussions around whys and hows of Index Investing will be of much value. So, please keep the questions coming.

I count on the established seniors to lead discussions, and nudge the efforts in the right direction.
 

jamit_05

Well-Known Member
#9
Re: Populating The Portfolio.

Promising thread this.
My questions -- 1. What to do if a company is moved out of Nifty 50? 2. Does NSE review Nifty 50 composition at regular interval? If so when is the next review due?
If the company is out of Nifty 50, then we sell our holdings. Bear whatever loss or profit that comes with it.

Yes, they do the reviewing every so often. Recently, they introduced Auropharma, Eicher motors and Removed Cairn, Vedanta, PnB...
 
#10
In the near future, the focus of this thread will be around buying scrips; sensibly populating the portfolio. Once bought, scrips wont be sold for a long time, unless they are taken out of Nifty 50.

Fund managing is still not a priority. To each his own.

Discussions around whys and hows of Index Investing will be of much value. So, please keep the questions coming.

I count on the established seniors to lead discussions, and nudge the efforts in the right direction.
OK, Not a senior . . . so not much to add there


Anyway, Good Luck for your Paper exercise :thumb:





Happy :)
 

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