Nifty Non-Cyclical Consumer Index Vs Nifty 50 : Comparative Analysis

17 May 2024
4 min read
Nifty Non-Cyclical Consumer Index Vs Nifty 50 : Comparative Analysis
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The Nifty Non-Cyclical Consumer Index aims to track the performance of a portfolio of stocks that broadly represent the Non-Cyclical Consumer theme within basic industries such as Consumer Goods, Consumer Services, Telecom, Services, Media, Entertainment, Publication, Textiles, and others.

The largest 30 stocks from eligible basic industries are chosen based on their 6-month average free-float market capitalization as of the cut-off dates at the end of January and July.

The weight of the stocks in the index is based on their free-float market capitalization, with the weight of a stock in the index capped at 10%. In this article, let’s see how Nifty Non-Cyclical Consumer Index, compares with the more popular index, Nifty 50 on different parameters.

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Return Profile

The Nifty Non-Cyclical Consumer Index has consistently outperformed key benchmarks, including Nifty 50, Nifty 500, and Nifty TMI, across various time periods. This robust performance underscores its potential as a dependable long-term investment option.

Index

CAGR_1y

CAGR_3y

CAGR_5y

CAGR_10y

CAGR_15y

NIFTY NON-CYCLICAL CONSUMER

30.80%

18.79%

17.22%

16.38%

17.66%

NIFTY 50

20.74%

17.12%

16.15%

14.57%

15.40%

Nifty 500

26.57%

20.19%

17.45%

16.04%

16.41%

Nifty TMI

26.47%

19.55%

16.46%

14.99%

15.23%

Comparison of Sharpe Ratio and Risk-Adjusted Returns 

Sharpe ratios and risk-adjusted returns are crucial metrics used by investors to evaluate the performance of an investment relative to the level of risk taken.

The Sharpe ratio measures the excess return generated by an investment per unit of risk, providing insight into its risk-adjusted performance. On the other hand, risk-adjusted returns assess the return on investment relative to the level of risk undertaken, helping investors gauge whether the returns earned adequately compensate for the risks taken.

The Nifty Non-Cyclical Consumer Index's favourable Sharpe ratios indicate superior risk-adjusted returns compared to Nifty 50, a prominent benchmark index. This suggests that the Nifty Non-Cyclical Consumer Index has consistently delivered excess returns relative to the level of risk assumed, making it an attractive option for investors seeking stability and growth in their portfolios.

 

15 years

10 years

5 years

Fund

Returns

Std

Sharpe

Returns

Std

Sharpe

Returns

Std

Sharpe

NIFTY NON-CYCLICAL CONSUMER

17.66%

5.03%

1.57

16.38%

4.24%

1.96

17.22%

4.50%

2.09

NIFTY 50

15.40%

5.70%

0.99

14.57%

4.84%

1.35

16.15%

5.61%

1.49

Nifty TMI

15.23%

5.93%

0.92

14.99%

5.00%

1.39

16.46%

5.75%

1.51

Comparison of Drawdowns 

Drawdowns refer to the peak-to-trough decline in the value of an investment, portfolio, or market index. They represent the extent to which an investment's value decreases from its peak level before eventually recovering.

Drawdowns are often used to assess the volatility and risk associated with an investment, with larger drawdowns indicating greater potential losses for investors.

During bear markets or periods of market downturns, the Nifty Non-Cyclical Consumer Index has demonstrated greater stability and resilience compared to the Nifty 50. Infact, during 11 market corrections, the Non-Cyclical Index outperformed the Nifty 50 Index 9 times!

This suggests that the Nifty Non-Cyclical Consumer Index experiences smaller declines in value during adverse market conditions, making it an attractive option for risk-averse investors seeking to minimize losses and preserve capital.

Market Volatility Periods

NIFTY 50

NIFTY NON-CYCLICAL CONSUMER

Feb-April 2008

-24.49%

-23.92%

Sept-Dec 2008

-45.13%

-36.46%

Aug-Oct 2011

-14.07%

-7.93%

April-June 2012

-9.14%

1.08%

June-Sept 2013

-6.84%

-0.90%

Oct 2015 - Jan 2016

-6.68%

-11.13%

July - Sept 2019

-10.29%

-3.83%

Feb - April 2020

-34.42%

-16.04%

May -July 2022

-10.71%

-6.86%

Oct - Dec 2022

-6.52%

-10.46%

Jan - April 2023

-7.61%

-6.21%

Valuation Analysis

The price-to-earnings (P/E) ratio is a widely used valuation metric that compares a company's current stock price to its earnings per share (EPS). It provides insight into how much investors are willing to pay for each unit of earnings generated by a company.

A high P/E ratio may indicate that the stock is overvalued, while a low P/E ratio may suggest that the stock is undervalued.

The Nifty Non-Cyclical Consumer Index's current P/E ratio is below its five and ten-year averages, signalling that it may be trading at an attractive valuation relative to historical levels. This suggests that investors are currently paying less for each unit of earnings generated by the companies within the index compared to previous periods.

With the current P/E ratio below its five and ten-year averages, valuations appear favourable for the Nifty Non-Cyclical Consumer Index. This implies that there may be potential for upside as the index is trading at a relatively lower valuation compared to its historical norms.


Nifty Non-Cyclical Consumer Index

10-year average P/E Ratio

5-year average P/E Ratio

Current P/E Ratio

101.01

140.99

59.35

These figures underscore the index's attractive valuation relative to its historical P/E ratios, potentially presenting an opportunity for investors to capitalize on undervalued assets within the non-cyclical consumer sector.

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