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Motilal Oswal Asset Management Company believes that investors should consider exposure to Nifty 500 index as it covers 90 per cent of market capitalisation against the most popular Nifty index which covers 51 per cent of the market-cap.
Investors looking to take advantage of India growth story should have exposure to a wider market including mid- and small-cap companies which will drive the growth in the long run.
Compared to the Nifty 50, the Nifty 500 Index is well-diversified, with its top 10 holdings accounting for only 37 per cent against 58 per cent in the Nifty 50 index. The broader index provides diversified exposure to 21 sectors, such as textiles, consumer services, media and forest materials that does not find place in Nifty 50 index. The index offers a blend of 75 per cent in largecap, 16 per cent in midcap and 9 per cent in smallcap.
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Currently, the passive funds tracking Nifty accounts for ₹2.7-lakh crore, while that of Sensex was ₹1.4-lakh crore. However, Nifty 500 is the most popular benchmark with 123 schemes with asset of ₹5.78-lakh crore tracking it against 47 and 51 schemes benchmarked to Nifty and S&P BSE-500 with assets of ₹2.79-lakh crore and ₹1.69-lakh crore, respectively.
Nifty 500 ETF
Motilal Oswal AMC will launch of the Motilal Oswal Nifty 500 ETF and list it on NSE on October 6.
Over the last three years, Nifty 500 index has delivered 25 per cent return on an annualised basis. The broader index has achieved a growth of 30 times compared to 23 times registered by Nifty 50.
The existing Motilal Oswal Nifty 500 Index Fund has registered the lowest one-year tracking error of four basis points as of August-end.
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Pratik Oswal, President (Passive Funds), Motilal Oswal AMC, said as the country embarks on a journey to become the world’s third-largest economy, the Motilal Oswal Nifty 500 ETF offers a unique opportunity to participate in this growth story as it reflects Indian economy compared to other indices.
Though the drawdowns are higher compared to Nifty, it makes sense for investors looking to create long term wealth, he said.
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