Nifty small-cap 250 quality 50  index :- Small caps stocks are 251 to 500 stocks from Nifty 500. Small Cap stock returns outperform the Large Cap and Mid Cap stock returns in the short and long run. More and more investors are showing interest in investing in small-cap stocks in India. But Investing in a small cap is sometimes very risky. You can even lose the complete capital. Investors have to thoroughly study various parameters of small-cap stocks. Even then it is not 100% sure that investors will get multi-bagger returns. The best way of investing in small-cap is via small-cap Index Mutual Funds.

Investors are aware of the Nifty Small Cap 250 index which tracks the performance of all 250 small-cap stocks. There is one more index called Nifty Smallcap 250 Quality 50 index.

This index tracks the performance of 50 quality small-cap stocks from the larger small-cap 250 index. These 50 small-cap companies are selected from their Quality Score. The quality score of each company is based on the following three factors related to a particular stock.

1.. ROE (Return on Equity)

2.. Debt to Equity Ratio (Financial Leverage)

3.. EPS.. Earning per share

Growth variability of each stock analyzed during the last 5 years. The weightage of each stock depends upon its quality score and free-float market capitalization.

This index was launched on 1^st April 2005 with a base value of 1000. 50 quality stocks are picked from the larger small-cap 250 index. This index reconstitutes twice a year (June and December). Top quality small cap stocks get selected satisfying the above conditions. Stocks having less quality scores move out.

Performance of  Nifty Small Cap 250 Quality 50 Index.

Source :- Nifty Indices

The following 2 links will give the reader a detailed PDF about 2 indexes

Who Should invest in Nifty Small cap Quality 50 Index.

A safe way to invest in small-cap stocks is by way of investing in Small-cap index funds. But the question is which Index is better to invest Small cap 250 or Small Cap quality 50 ?. Investors should  consider the following points before investing

Nifty small cap  quality 50 Index Fund

Many Mutual fund houses have launched index mutual fund schemes in the Nifty smallcap 250 quality 50 index. Most of them are recently launched schemes. Some of these funds are listed below.

1..DSP nifty smallcap250 quality 50 index fund Direct Growth

The DSP Nifty Smallcap250 Quality 50 Index Fund Direct-Growth has been recently launch on 23^rd Dec, 2023 by DSP Mutual fund. So duration is very small to judge its performance. The  AUM of DSP Nifty Smallcap250 Quality 50 Index Fund Direct-Growth is ₹62.05Cr as of 13 Apr 2024.

Expense Ratio is 0.30% as on 13^th April, 2024. Exit load is NIL. The minimum SIP amount for investment is Rs. 100.

2.. Max Life NIFTY Smallcap Quality Index Fund

The Max Life NIFTY Smallcap Quality Index Fund was recently launched on 23 Aug 23, 2023 by Max Life. So duration is very small to judge its performance.

3.. Bajaj Allianz Life SmallCap Quality Index Fund

Bajaj Allianz Life has recently launched ‘Bajaj Allianz Life Small Cap Quality Index Fund’ NFO from 1^st March to 15^th March 2024. Newly launched schemes so the duration is very small to analyse its performance.

Conclusion:- 

All these  MF schemes in the Smallcap Quality 50 index were recently launched so period is very little to judge its historical returns. Investors with having high-risk appetite can think of investing in these schemes. Those Investors who want concentrated small-cap exposure to their portfolio can invest in these funds. Since the small-cap Quality 50 Index is concentrated in 50 quality small-cap stocks, it is riskier as compared to the larger small-cap 250 index.

Although past performance does not guarantee future returns. Investors can expect better rewards. Since all these schemes are following the Nifty small cap 250 quality 50 index passively. These schemes can give returns like that of returns of Nifty small cap 250 quality 50 index. Historical returns of Nifty small cap 250 quality 50 index since inception is approx. 20 %. So Investors can expect returns of 15 to 20% from these funds. Investors should check their risk appetite and consult a financial advisor before making any final decision.