How overseas investors can access the NSE Nifty 50 (India 50) Index
At the recent World Economic Forum at Davos, David Rubenstein, co-founder of private equity leviathan Carlye, said that India is now “more attractive” than China.
India’s benchmark stock index the NSE Nifty 50 can back that claim up.
Home to the world's largest equity derivatives market by volume and posting a series of impressive gains, the Nifty 50 has been attracting attention from global money managers.
Nifty 50 (India 50)
This trend continued at Davos. Saint Gobain global CEO Benoit Bazin used the venue to declare fresh investments worth INR55bn ($735m) in the state of Maharashtra - home to India’s financial powerhouse Mumbai.
With foreign institutional and portfolio investors collectively having invested $130bn in Indian stocks, qualified international investors from over 45 countries can now access the Nifty 50 Index.
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Why India’s NSE Nifty50?
Given the performance of India’s benchmarked Nifty 50 stock index in recent years, it is understandable that the Indian delegation was welcomed at Davos.
Over the past 20 years, Nifty50 has given 14.18% compounded annual returns. Over the same period gold has given 12.38%, while other asset classes even lower.
The blue chip Nifty 50 comprises large-size publicly traded companies in the south Asian country.
The biggest beast on the Nifty 50 Index is Reliance Industries, which makes up 10% of the market’s cap. Other big names in the top ten include tech firm Infosys and the Tata Consultancy.
Unsurprisingly given the NSE Nifty 50’s blue chip status, financials are important accounting for nearly 35% of the total weight and with HDFC and ICICI banks both making the top five in terms of valuation.
HDFC
The NIFTY 50 is computed in four currencies: Indian Rupee (INR), US dollar (USD), Australian dollar (AUD) and Canadian dollar (CAD).
It is also possible to trade to futures and options linked to the Nifty 50 on the Singapore Exchange (SGX).
Transacted in US dollars, these derivatives contracts enable foreign investors to access Indian markets outside the regulatory purview of Indian stock exchanges.
The 16-hour time window also allows market participants to take a view on the Indian markets based on overnight developments in Wall Street enhancing their decision making capacity.
US Dollar Index
How is the NSE Nifty 50 Index calculated?
The index is determined by a free-float capitalisation method. This method, one of the popular methods across the globe, takes into account those shares available for trading.
Another approach for a stock index calculation is full market capitalisation method where the firms with a higher market cap will receive a greater weighting in the index, such as the S&P 500 (US500).
This National Stock Exchange Fifty which hosts the Nifty50 has been the world’s largest equity derivatives exchange for the last three years in terms of number of contracts traded.
This is according to data from the industry association, the World Federation of Exchanges.
Indian blue chips 'best' in Asia
It also is ranked fourth globally in cash equities. As of 8 June, NSE Nifty 50 has a market capitalisation of $1.7trn.
This valuation has been the result of a decade of positive returns for India’s blue chips, according to Arun Kejriwal of research and advisory firm KRIS.
“Indian blue chips have given over 20% returns on a calendar year basis for the past 10 years, which is by far the best index performance across Asia,” said Arun.
S&P 500 (US 500)
How can offshore retail investors access the Nifty 50?
If you are an individual investor who is looking to access the India 50 you can become a foreign portfolio investor (FPI) or operate a sub-account with a registered institutional investor to directly invest in Indian equity markets.
Another category - qualified foreign investor, also includes an overseas individual investor, in over 45 countries, provided they meet certain criteria stipulated by the local regulators.
Non-Indian individual investors, based outside of India, can look to invest into India’s benchmark index NSE Nifty 50 via exchange traded funds (ETFs) that track the Indian index. Here are four major India 50 ETFs
First Trust India NIFTY 50 Equal Weight ETF
First Trust India NIFTY 50 Equal Weight ETF aims to track the Nifty 50 equal weight tracker, and takes exposure to Indian large-cap equities.
The ETF, which manages $49.6 worth assets, has an expense ratio of 0.80%.
iShares India 50 ETF
Backed by world’s largest fund manager, BlackRock, The iShares India 50 ETF seeks to track the investment results of an index composed of 50 of the largest Indian equities, with the underlying benchmark index as Nifty50.
The ETF, which manages assets worth $592m, has an expense ratio of 0.90%.
BlackRock
Nifty 50 Swap UCITS ETF 1C
Launched in 2007, DWS Investment S.A. manages this ETF that tracks India’s Nifty 50 index. THe ETF has assets under management worth EUR112m and has an expense ratio of 0.85%.
The product overview documents states that the aim of this ETF is to reflect the performance of the Nifty 50 index.
Which Mutual Funds track the Nifty50?
Several international institutional investors offer Nifty50 index funds that passively track the benchmark index of the NSE.
Most of these funds generated an annual return of 13 to 13.5% over the past three years. Index funds are typically cheaper in terms of costs, as against usual equity funds.
Since the fund managers passively track the stock index, the expense ratios also tend to be lower, typically in the 0.10 to 0.15%, except a newcomer in the Indian fund market which charges 0.06%.
Here are some of those global investors’ NSE Nifty50 index funds
Nippon India Index Fund - Nifty Plan
With one of the highest expense ratios at 1.08%, Nippon India Mutual Fund offers an index fund that tracks Nifty50.
The Nippon India index fund manages investments worth INR5bn ($66m) under this Nifty index fund and is owned by the largest Japanese life insurance company by revenue, Nippon Life Insurance Company.
Franklin India Index Fund-NSE Nifty
American fund manager Franklin Templeton Investments has an index fund that tracks The NSE Nifty50 which has assets under management worth $60m and an expense ratio at 0.68%. As on 21 June 2022, the fund generated an annualised yield of 9.25% over the past three years.
Mirae Asset Nifty 50 ETF
Mirae Asset Nifty index fund charges one of the least to its individual investors with an expense ratio of 0.05%.
The fund, since its inception, has given its investors returns of 12.48% and is owned by the Korean fund manager of the same name.
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