Technical Analysis of Indian Equities by Nooresh

Nifty Next 50–Same Bottoms for a Year.

Nifty Next50 has made an interesting formation for the last year. Almost bottoming out around the same base for 4 times in the last 1 year.

Nifty Next50 Technical Chart

Nifty Next 50

  • Same bottoms for last 1 year.
  • Knocking at the last 2 months high.
  • This is still down 17% from the highs.
  • Also topped out in January 2018 like all other broader indices.
  • Did make an attempt to try all time highs in Sept 2018.
  • Now for the last 1 year even this index is diverging with the Nifty50.

Over a long period of time Nifty Next50 has generally outperformed Nifty50.

Nifty 50 and Nifty Next 50

1) Over the last 5 years the Nifty next 50 has outperformed nicely.

5 year Nifty next 50

2) Over the max period also a strong outperformance.

Max Nifty next 50

If i were to run a long term large cap index fund strategy would be a mix of Nifty50 and Nifty Next 50 in some ratio say a 50-50 or rather just the Nifty next50. 

One of the major reasons to like the Nifty next50 index is that it is a lot more diversified and less top heavy.

3) Long periods of Underperformance too.

But there are long periods of underperformance too. A lil old snapshot from a post on capitalmind. Suppose the underperformance has continued and now this has lasted 300 plus trading sessions. Only time this did so was in 2008 fall and 2011-2012 fall.

Charts: The Underperformance of the Next 50

Source – Capitalmind

Given the stretch and good formation it could well be the time for Nifty Next50 to outperform the Nifty50. Will it happen due to Nifty

The Top 20 names in the Index as per weight.

HDFCLIFE 3.98
DABUR 3.74
SBILIFE 3.71
GODREJCP 3.4
SHREECEM 3.34
PEL 3.16
PIDILITIND 3.1
DIVISLAB 3.05
MARICO 2.98
ICICIGI 2.95
PETRONET 2.95
HINDPETRO 2.86
MCDOWELL-N 2.76
LUPIN 2.62
COLPAL 2.5
HAVELLS 2.5
AUROPHARMA 2.49
DMART 2.46
BAJAJHLDNG 2.45
INDIGO 2.4
  • Very well diversified across stocks with nothing weight more than 4%.
  • At the same time Nifty50 has top 8 names above 4% weight and comprise 55% of the index. The Top 8 here comprise only 28%.
  • So even the bottom 10-20-30 stocks in Nifty next 50 can give a good impact to the performance.

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Article by Nooresh Merani

Nooresh has written 2754 articles.

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