The 50 biggest Indian firms listed on the National Stock Exchange (NSE) make up the Nifty 50 index. All of the companies listed on the NSE have a market value that is far higher than these 50 companies combined. Investing in the Nifty 50 gives investors access to some of the biggest and most well-known companies in India. This piece will go over a few of the main advantages that investors can get from interacting with the Nifty 50 index.
The act of diversification
Diversification is a key benefit of investing in the Nifty 50. Investors may instantly diversify their portfolios among 50 major firms and other sectors of the Indian economy by purchasing an index fund that tracks the Nifty 50. As a result, the risks particular to the company and sector are reduced. The index includes representation from several industries, including consumer products, healthcare, oil and gas, IT, and finance. Thus, by investing in a single Nifty 50 ETF or index fund, investors can obtain diversified exposure to the entire market without having to choose individual stocks.
Availability of liquid assets
Investing in these firms offers investors strong liquidity because the Nifty 50 is made up of the 50 largest and most liquid stocks traded on the NSE. Due to the daily high trading volumes among the Nifty 50 constituents, investors can enter and exit their holdings rather easily. This helps investors steer clear of the danger related to small and mid-cap stocks’ liquidity. Large buy or sale orders can be carried out with little effect on prices thanks to the strong liquidity.
Lower Cost: Compared to actively managed mutual funds or stock selection, index funds and exchange-traded funds (ETFs) that track the Nifty 50 are available at a far lower price. A larger portion of the investor’s money can be invested to generate long-term profits because these passive funds have lower expense ratios. Additionally, there are no fund management expenses. As a result, investors can profit at a comparatively lower cost from the Indian stock market’s long-term wealth generation.
Exposure to the Growth Story of India
Purchasing Nifty 50 index shares permits investors to share in India’s economic growth and development. The companies that make up this index are industry leaders and are well-positioned to benefit from India’s potential for long-term growth in several industries, including manufacturing, financial services, infrastructure, and consumer. Given that India’s GDP growth rate is expected to remain strong over the coming decades, investing in large-cap businesses through the Nifty 50 provides an opportunity to benefit from the country’s success story.
Tax Efficiency
For long-term capital gains (holding times longer than a year), equity investments in index funds or exchange-traded funds (ETFs) are taxed at just 10% without indexation advantages. As a result, their tax efficiency is higher than that of traditional stock mutual funds, where capital gains—both short- and long-term—are subject to taxation based on the individual’s tax slab rates. Furthermore, dividend income from Nifty 50 assets is subject to 10% tax, which is generally less than the individual’s income tax bracket rate. Investing in the Nifty 50 is therefore a fairly tax-efficient way to build long-term stock market wealth.
Conclusion
In conclusion, 5paisa investors have a simple method for utilizing the Nifty 50 to build a diversified portfolio. With just one click, investors may access the biggest companies in India in more than 15 categories. 5paisa offers a selection of low-cost Nifty 50 ETFs and Index funds that come with benefits including diversification, lower investing costs, liquidity, and exposure to India’s growth.
