Bank Nifty Vs. Nifty 50: Comparing Performance And Understanding Sectoral Differences
Two substantial indices in the National Stock Exchange are Bank Nifty and Nifty 50. As the name suggests, bank nifty refers to the twelve large capitalized bank stocks. Meanwhile, the Nifty 50 includes fifty significant company stocks. These fifty stocks are all-encompassing and include thirteen major industrial sectors like banking, pharma, IT, etc.
Those seeking a diverse portfolio are suggested to invest in the nifty 50 index. However, the other variant is more convenient if you want to concentrate on the banking sector. However, there are some performance and sectoral differences between them that you must be aware of before investing.
Here, you will find a detailed comparative study of the two approaches for a better understanding. Read along to learn more.
What Are The Differences Between Bank Nifty And Nifty 50?
There are various dissimilarities between the two indices based on the different market aspects. Understanding this variance will help you strategize your investment plan. Before we delve deeper into the details, let us take a quick look at the tabular representation of the comparative study.
| Bank Nifty | Nifty 50 |
| Limited only to bank stocks. Thus, it consists of only twelve stocks. | A diverse portfolio. It consists of fifty stocks from thirteen sectors |
| The risk is concentrated and increases the chances of loss. | The versatility of the index decreases the chances of risk as it is spread out. |
| This cannot determine the entire market performance. | Here, we get an overview of the entire stock market performance |
| Only a change in the banking world can help trigger a fluctuation. | Alterations anywhere effects can instigate a fluctuation |
| It offers more volatility | It offers more stability |
| The trading liquidity is more focus | The trading liquidity is more smooth |
Let us now look at how they vary from each other in detail.
Performance
Since Bank Nifty has a more constricted constitution, its performance is more volatile and fit for short-term gains. In the case of the other, the diversity of stocks makes it more suitable for long-term investments. Hence, nifty 50 performs more stably in the long run than its counterpart, i.e., the risk is less in the former index. A small piece of advice: You can use the nifty screener to filter your stocks based on price, dividend, P/E ratio, etc. This tool will offer a more transparent and more precise understanding.
Annual Returns
The returns each year from these two indices differ as well. Returns depend on how the stocks have performed throughout the year. The Nifty 50 index comprises more stocks, so the returns are pretty high compared to the bank nifty.
For instance, in the last fiscal year that ended on 22nd April 2024, the Bank Nifty returns were 12.41%, and Nifty 50 index returns were more than double: 25.89%. Hence, the latter is more convenient if you seek a greater share return.
Market Dependency
Bank nifty will only witness a change when there is something new in the banking sector, like interest fluctuations or, in some cases, economic shifts. It mainly depends on the bank’s performance and its non-performing assets. Nifty 50, on the other hand, is influenced by government intervention, elections, the economy, global events, foreign investments, and much more. However, the risk in the former is concentrated, whereas it is more divided in the latter index.
Sectoral
The Nifty 50 index is an amalgamation of fifty stocks from various market sectors like IT, Pharma, FMCG, Financial services, etc. Some of the prominent shares are ONGC, Adani, Apollo Hospital, Asian Paints, Cipla, Dr Reddy’s Laboratories, Hero MotoCorp, and various others. Bank Nifty deals with only twelve banks: HDFC, Axis, ICICI, Bandhan, Federal, State Bank, etc.
Market Type
Nifty 50 index is more stable as it consists of fifty various stocks, whereas Bank Nifty is more volatile since it only deals with twelve banks. However, both indices can be profitable if invested carefully.
For instance, Bank Nifty is the best choice for short-term investments since its volatility offers profitability. Nifty 50, on the other hand, is a better option for long-term goals since it provides maximum stability.
Conclusion
There is a stark distinction between these two significant indices based on sectors and performance. Hence, plan your investments for maximum profit for short- and long-term goals. However, ensure you correctly research these two before investing for improved comprehension.
Once you understand these differences, accessing a stock market app like Research 360 by Motilal Oswal will help you make the right investment decisions.
