We’re really happy to announce our new smallcase BM Nifty Top 20. Lets have a brief overview of our new smallcase offering.
- The Nifty 50 is a diversified set of companies bunched together as an index. These companies originate from almost all conceivable sectors and stocks. Many of the Nifty constituents lack sustainable competitive advantages in the long run. They are just to represent each corner of the economy. In the long run such companies fail to do well but in the short run they are included in the Nifty as the business may be undergoing a cyclical upturn.
- In this context that we have designed a portfolio of 20 solid names. Companies that will keep growing for longer periods of time and will delivery above average returns when compared to the underlying index – the Nifty 50.
- We have termed our smallcase offering as ‘BM Nifty Top 20’ that can generate alpha over a Nifty ETF that blindly mirrors the constituents of the Nifty 50. We have built this keeping in mind the lower risk appetite of many small investors that have lower capital and who want to beat the Nifty 50 and an average mutual fund over a longer-term time horizon.
- We have kept the cost in check and also ensured that these large cap growth names exhibit better returns with lower volatility.
- We were flooded with hundreds of requests from our Youtube Subscribers to do something for the small retail investor who comes to the market with limited capital and limited risk appetite.
|Portfolio Metrics (Last 10 year CAGR)||BM NIFTY Top 20||NIFTY 50|
|Weighted Average Stock Price Return||17.73%||15.42%|
- Financials is the highest overweight sector about 43% allocation. We have seen that both private sector banks and NBFCs have gained market share from PSU banks over the last decade and this structural shift should spill over to the next decade also.
- Consumers are roughly 15% of the overall portfolio which will gain from the rise of the Indian middleclass consumption as India’s per capita income increases over the next decade.
- IT services is 10% of the portfolio which will benefit from long term structural factors like offshoring of IT services to low cost and largest skilled manpower present in India. These companies are hugely profitable and have the scale and size to benefit from the increased focus on digitisation, automation and cost optimization drive of companies across the globe.
We have excluded companies where:
- Revenue growth and EPS growth have been below average (sub-optimal) compared to the NIFTY 50
- Businesses which are cyclical and commoditized where there are no competitive advantages. However, we have some commodity players which are lowest cost producers and have efficient capital allocation policies.
- Companies that have corporate governance issues
To know more about BM NIFTY Top 20, watch the video below.