While browsing my Google Now feed I came across an article by pattu sir for Index funds. The indices mentioned there captured my attention and It sparked off curiosity in knowing more about those indices. I searched about those indices in various places places like a boy searches for a girl. The search throw up more interesting results about the index with its mind blowing outperformance of Nifty 50. The more I dug deeper more interesting it began to get. Read on my 2 month journey into Nifty Alpha 50.
Khoj of Nifty Alpha 50
Though the spirit was kindred by Pattu sir, the official journey began with a google search on CNX alpha stocks (now its known as Nifty Alpha 50). The search landed on Nifty’s Strategy Indices page, I immediately downloaded the list of stocks, methodology and fact-sheet of that index. In this phase I was in data gathering mode. I collected all that info I could.
After it, I tried to understand the methodology of preparing the Nifty Alpha 50 index, The fact-sheet of that Nifty Alpha 50 index. Initially it all sounded Greek to me. I started off asking questions in AIFW if I didn’t understand. Questions were technical like how Beta gets calculated?, what is R^2? etc.
Once I had a firm grip on the subject I jumped in with smaller purchases. I kept a close eye on all the announcements of NSE, I still visit NSE’s Press Releases section even now. The keen focus on press releases helped me to know the stocks that would get booted out of index bit early(Ex: The October month press release stated Gujrat Pipav Port, Motherson Sumi and 8 other would be booted out of index by 25 Oct and I could prepare for that to be done in my tracker too).Once I got comfortable with Index I started off with smaller purchases. Even though the the index had bigger stocks like MRF, Page & Eicher, I didn’t backed off I moved on. My initial plan was purchase 1 shares of all the constituents first and then start balancing it.
Growing Me alongside Nifty Alpha 50
The nifty alpha 50 is the fastest growing index among the NSE Indices. Being the fastest growing index I had to challenge myself to increase my knowledge along side this index. I set myself on the knowledge growth by going through each concept about the index and trying to understand what it was, how it was done and to some extent why it was done the way it was done(You can also check out what? how? why? framework I use).
I started off to learn the various concepts like free float market cap, R^2, Beta on the old trusted guard investopedia. I did asked questions on statistical analysis in AIFW too. The other source where I learned things was NSE’s Index Concepts section. I did learn some things practically too specially the concept of Bid Ask Spread when trying to trade.
The practical learning of Bid Ask Spread was revealing as it shed light on costs I would incur for bigger purchases of stocks like MRF, Page and Eicher. Trading costs estimates of this index was higher and I decided to hop onto discount broker. This decision cooled of my costs significantly. If I had pay 0.5% of 40,000 as brokerage, it would come to a whopping brokerage of 200 rupees. So the cost cooling did gave a huge benefit for me. Apart from costs the price of acquisition also played vital role.
To further optimize my entry into stock I started off with technical analysis.I learned the technical analysis on investopedia. The core reason why I resorted to technical analysis was to get the entry into a stock correct. I learned out various charting and oscillators like RSI. This focus on technicals helped me immensely in not paying too high price for a stock.
These various connections of technical analysis, managing costs, understanding of markets increased my mental connections. This interlinking of concepts is like drawing a rangoli in my mind. By learning new things the rangoli expands from 3 x 3 into 4 x 4 and higher. Also my focus on this index is not shutting off my investments in Mutual Funds at all.The SIP will run their due course. To me this tracking Nifty Alpha 50 is like journey, when I reach the same point as I started, I will be much wiser from the experience. Even though the sum total of this exercise is zero.