NIFTY 50 SHARE PRICE VS BANK NIFTY SHARE PRICE
Like Nifty 50, bank nifty is also an important index of National stock exchange. Most investors will be having their eye over these indices along with Nifty Next 50 index.
Here we are going to discuss how the journey has been from the last 5 years. If an investor has invested Rs. 10000, it would be currently at Rs. 14589 in nifty 50 share price. With bank nifty share price it has grown to Rs. 14153.
Both the indices have shown a similar return. In which bank nifty has more volatility in these 5 years with very higher P/E at the time of 2018-2019.
Also, we will be taking through,
1. Performance comparison.
2. Year on Year return (last 5 years, last 4 years, last 3 years, etc.)
3. Comparison of share price vs P/E.
4. Insights for passive investors.
NIFTY 50 AND BANK NIFTY:
As our regular regulars will be knowing about Nifty 50. As we have discussed more in our previous topics.
Nifty 50, consists of the top 50 companies of the Indian market with market capitalizations. It consists of diversified sectors like banking, technology, Oil & Refinery, FMCG, Pharma, real estate, etc.
Bank Nifty consists of 12 top private and public banks in its bucket. The index is highly packed by HDFC Bank as it has 1/4th of the total composition. The other banks are ICICI Bank, Kotak Mahindra Bank, Axis bank, SBI Bank, IndusInd Bank, Bandhan Bank, Federal Bank, RBL Bank, Bank of Baroda, IDFC Bank, Punjab National bank.
This is one of the all-time performing sectoral Indexes. This index will decide the economic situation of our country. Also, this sector has a huge weightage in Nifty 50.
NIFTY 50 SHARE PRICE VS BANK NIFTY SHARE PRICE – PERFORMANCE:
The COVID-19 crash has made both the index to fall and tear out their performance. In which Nifty 50 has fallen by 38% and bank nifty fell down by 44%.
Once the market showed a V-Shaped recovery, the nifty is just 600 points behind the 52-Weeks high. But, Bank nifty has shortfall by almost 7000 points behinds 52-weeks high.
This is the image of the last 5-year performance. The 5 years performance has paid of 7.85% on Nifty 50 vs 7.19% on bank Nifty.
The surprising thing was, in the last year on year performance in every aspects Nifty 50 has surpassed Bank Nifty.
With this image above, we have found that if an investor invested in the last 1 year. The return from Nifty 50 will be just 1.33%. The bank nifty has given the worst return of -16.12%.
If an investor has done their investment in 2018, September. The nifty return was 3.07% per year and bank nifty has given a negative return -1.38%.
In a similar way, the last 3-year return of nifty and bank nifty are 5.89% and 0.47% P. A. respectively.
The last 4 years returns are 7. 72% with nifty and 6.08% with bank nifty.
This makes a clear understanding of Bank nifty has never beaten in the past 5 years with Nifty 50.
So, when we take an option of investing in an index, choose Nifty 50 for an index fund or ETF.
COMPARISION OF SHARE PRICE AND P/E:
Source: NSE Website
Source: NSE Website
In this section, we are going to look at the share price and its P/E value of both the indices.
The major focus will be the difference between the before COVID-19 crash and Post COVID-19 crash.
When we check in the above criteria when the share price was at 12,018. The P/E was at 28.33. The earnings were 424.21 per share. This was the condition before the Covid-19 crash.
Post Covid-19 crash, the current price has shot up to 11647. But the P/E is at 32.67.
The price is comparatively low when compared to Jan’2020. But, the P/E is grown by 4 times.
This clears that the earnings have come down, whereas the share prices have moved up.
This index was traded at high P/E in the last 2017 – 2019. The average P/E was around 45-50 times of the earning, which is too high.
The current P/E is at 26.77. The P/E before Covid-19 crash was at 35.04 and during the crash, it moved to 19.67.
There was a huge crash of 44% during Covid-19 and still couldn’t recover as Nifty has done. This is completely due to high P/E ratio in the last 3 years.
So, as investors, we should avoid investing at high P/E.
INSIGHTS FOR INVESTORS:
· Avoid investing in high P/E. High P/E would yield a very low return of less than 3% or even negative return.
· You can avoid these types of investments and can deposit in fixed income instruments.
· Even Nifty 50 is trading at all-time high P/E. So, better avoid investing at 33 times of earnings.
· Better stay with Nifty 50 when you invest in Indices. Nifty 50 has shown low volatility when compared to Nifty Next 50 and Bank Nifty.
· The GDP return is expected to be negative, the earnings of the market have come down by 10%.
· So, avoid investing at a high price. Invest in debt funds like liquid funds or ultra-short funds until the market corrects.