Alpha Ideas

The Nifty index is the most popular index used to track the Indian equity markets.

The index was launched on November 3, 1995 with a base value of 1000.

Today Nifty closed at 7300 levels.

If one held the Nifty tenaciously for all these years,one would have got a return of around 12% p.a.

The average dividend yield on Nifty stocks has been around 1%-2% but the gain would have been negated  by the impact cost.

The impact cost of holding the Nifty would have been very high.In all these years, there have been 151 changes to the Nifty-that’s an average of 8 changes every year !!

So passive investing in India is actually active investing-a momentum play on the biggest market cap stocks.Here the “active” role is played by the index maintenance folks.

On a different note, is 12% pa that great a return in the Indian  inflation environment of 10% to justify the time,energy,money spent by investors to get the next multi bagger?