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Time of India
13-06-2025
- Business
- Time of India
Can BSE 1000 Index Fund offer all-weather portfolio to beat Nifty? Pratik Oswal explains
When most investors think passive investing, they think Nifty 50. The bold ones might venture into Nifty 500. But what if the real opportunity lies in the 500 companies they're missing? Pratik Oswal , Chief of Passive Business at Motilal Oswal Asset Management Company , believes India's investment story is incomplete without accessing its broadest equity universe. The firm's latest offering, the BSE 1000 Index Fund, covers 94% of India's listed market capitalization—a stark contrast to the Nifty 50's focus on just the top 50 companies. "The BSE 1000 has outperformed Nifty 50 in 10 of the last 17 years," Oswal reveals, attributing this edge to something most investors overlook: the untapped potential of microcaps and mid-caps that make up the broader market ecosystem. Edited excerpts from a chat: The BSE 1000 Index Fund is Motilal Oswal AMC's latest passive offering. What was the core idea behind launching this product now? India's equity markets have evolved significantly — from being dominated by a few companies to a vibrant ecosystem of over a thousand listed businesses across sectors and sizes. The BSE 1000 Index Fund was launched to help investors participate in India's full growth story — not just the top 50 or 100 companies. With broader indices correcting slightly and valuations moving closer to long-term averages, we believe this is a strategic moment to introduce a product that combines stability, diversification, and long-term potential in a single, passive format. Investors are very familiar with indices like Nifty 50 and Nifty 500. Why did you choose the BSE 1000 — and what unique advantage does it offer over these traditional benchmarks? The BSE 1000 is India's broadest equity index, covering ~94% of the listed market cap. While indices like Nifty 50 or Nifty 500 focus on depth, the BSE 1000 brings both breadth and depth. Key advantages over traditional indices: Wider market representation — includes the top 1000 companies vs. 500 or fewer. Inclusion of Microcaps – Early-stage, high-growth companies not part of Nifty 500. Sectoral diversity — covers all 22 sectors, while Nifty 50 covers around 15. Lower concentration risk — more balanced exposure to both old and new economy themes. Performance edge — the index has outperformed Nifty 50 in 10 of the last 17 years and delivered better SIP outcomes over the long term. The BSE 1000 covers nearly 94% of India's listed market cap. Does this wide representation help reduce concentration risk, which is often a concern with passive strategies? At the same time, isn't it over-diversification? Absolutely, the broad coverage is a strength, not a drawback. In fact, the BSE 1000 is designed to reduce single-stock and sector-level risks, which are more pronounced in narrower indices. And rather than 'over-diversification,' this is actually smart diversification. The index provides meaningful exposure to segments like midcaps and microcaps — which are driving growth — without overexposing investors to their volatility. In fact, the BSE 1000 shows lower volatility over the last 15 years than a highly concentrated index like Nifty 50. The result is a more balanced, all-weather portfolio . The index spans large, mid, small, and micro caps. In an environment where mid and smallcaps are trading at elevated valuations, how does this fund manage risk without active selection? Being a passive fund, we don't actively select stocks — but the index structure itself helps manage risk through diversification. Large caps provide the base stability. Mid and smallcaps contribute alpha during market upcycles. Microcaps, while having higher beta, unlock hidden growth opportunities Importantly, valuations in the broader market have cooled slightly in recent months, and the current P/E levels of the BSE 1000 are near long-term medians — indicating fair valuations across the spectrum. Microcaps are a significant part of the index — and typically under-researched. What would you say to investors worried about liquidity or volatility in that segment? It's true that microcaps carry higher volatility — but they make up only around 5% of the total index. Interestingly, over the past 5 years: Microcaps' share in total market cap has doubled. Average market cap of microcap companies has grown sixfold. Their average daily trading volumes have surged 13x — reflecting rising investor participation, mobile trading, and index inclusion (e.g., BSE Next 500). Yet, 87% of these companies have 5 or fewer analysts tracking them, meaning there's real potential for discovery. For investors, this means measured exposure to high-growth companies — without needing to pick individual names. You've highlighted the long-term performance edge of the BSE 1000 over the Nifty 50. What's driving this outperformance — is it purely the breadth or something more structural? It's both. Breadth plays a role, but the structural edge comes from: Participating in early-stage growth from mid and microcap companies. Better sector rotation and thematic representation — like manufacturing, digital, and financial inclusion. Lower concentration — avoiding overexposure to a few dominant names. Over time, this combination of more sectors, more companies, and more growth engines leads to better compounding — as reflected in its historical performance vs. Nifty 50. Passive investing has gained huge traction in India over the last few years. How do you see this trend evolving, especially in a market like ours that's still heavily actively managed? India is still early in its passive journey. But we're seeing a shift: More investors are embracing cost-efficiency and transparency. Many active funds are struggling to consistently outperform broad indices — especially in large caps. New themes like factor investing and broad-based indices (like BSE 1000) are making passive products more relevant. We believe passive AUM in India could double in the next 3–4 years, driven by both retail and institutional adoption. Given the current market phase — soft corrections, pockets of froth — do you think it's the right time for investors to consider broad-based passive products? Yes — in fact, this is precisely the time to look at broad-based passive investing. Markets have corrected ~5–10% from peaks. Valuations are near long-term averages. Volatility has increased — and passive strategies reduce decision-making stress. Broad based funds reflect the economy better during uncertain times. For long-term investors, timing the market is less important than time in the market — and broad-based index funds like BSE 1000 are built to ride through cycles while capturing India's growth. Lastly, what's the tracking error you're targeting for this fund, and how will you ensure efficient execution given the wide base of 1000 stocks? We have a strong track record of managing passive funds efficiently, even those with complex or deep indices: Our Nifty 500 Fund maintains a tracking error of just 8 bps. Our Nifty Microcap 250 Fund — despite lower liquidity — is managed with just 60 bps tracking error. For the BSE 1000 Index Fund, we expect tracking error to remain broadly in line with our Nifty 500 Fund — with a marginal increase owing to the inclusion of microcaps. This is possible due to experienced trading and quant teams, strong counterparty relationships for execution and rigorous internal tracking systems. We believe scale, systems, and specialization are key to maintaining low tracking error — even in a 1000-stock fund.
Time of India
18-05-2025
- Business
- Time of India
India-US trade deal, Q4 results among 6 factors likely to impact D-St activity this week
The Indian equity market witnessed a stellar rally this week with a more than 1,000 point gain on the benchmark Nifty 50. The Nifty managed to close above the 25,000 mark and recovered all the losses seen since October 2024. The week started with a bang, with rapid developments over the weekend on the border front that led to a stoppage in hostilities between India and Pakistan. Operation Sindoor, conducted by the Indian armed forces, was a decisive success that translated into improved market sentiment. The strength in the frontline indices translated into broader market gains with the BSE Midcap/Smallcap indices gaining 6.9%/9.2% respectively. 'From a technical standpoint, the current chart structure suggests that the bullish momentum is likely to extend into the coming week. We expect Nifty to move toward 25,300 in the short term, with the potential to stretch further toward 25,600,' noted domestic brokerage firm SBI Securities. SBI Securities further noted that on the downside, the zone of 24,750-24,700 is likely to provide a cushion in case of any immediate decline. Factors that are likely to impact movement when markets reopen this week: 1. Corporate earnings Next week, the markets will focus on the remainder of the earnings season. 2. India-US trade deal The market will also look out for any likely developments on the India-US trade deal . 3. Foreign inflows Participants will continue to monitor foreign capital flows, which have played a significant role in sustaining the current rally. 4. Technical outlook Having broken out of a three-week consolidation, the Nifty is expected to sustain its upward momentum. 'The index is now targeting levels of 25,200–25,600. On the downside, the earlier resistance at 24,800 is likely to act as immediate support, with a stronger support base at 24,400,' said Ajit Mishra, SVP of Research at Religare Broking. 5. Currency moves The Indian Rupee appreciated marginally by 5 paise against the US dollar, closing at 85.50. This gain was supported by a weakening dollar index and easing crude oil prices. Rupee traded in a narrow range between 85.45 and 85.48 against the US dollar, reflecting a largely range-bound session. The dollar index hovered around 100.70, showing limited directional bias. 'With no major triggers, the rupee is expected to continue trading within a broader range of 85.00 to 85.75 in the near term,' noted Jateen Trivedi, VP Research Analyst - Commodity and Currency at LKP Securities. 6. Crude Oil impact Oil prices have inched higher to $62.3/barrel on the back of a weaker dollar. However, any sharp gains may be capped by the potential US-Iran deal and ongoing uncertainty surrounding global trade and economic growth.
