Nifty Or Sensex?

Investing in an index fund may be a dumb idea, but the choice of index is certainly more tricky. Here is why a Nifty fund is better than a Sensex fund

Index funds are often considered wiser alternatives because they are devoid of market risk and hence you don't run the risk of underperformance by the fund manager. But the index itself undergoes changes every now and then, and so it is better to be aware of the changes happening to your index. So, should a change in the composition of the index influence your decision to stay invested in a fund?

Well, once you are sold to the idea of an index fund, then you do not have much choice. You can only choose between the various indices that funds track.

After the top stock exchanges in the country have reviewed their index constituents recently, this seems to be the question crossing investors' minds. So, between the Sensex and the Nifty, the two major indices on the Indian bourses which most funds track, which one is better?

The National Stock Exchange Index cell announced the inclusion of Wipro in its maiden index Nifty with effect from January 17, 2001. This was included in place of HCL Technologies. Kochi Refineries, a dormant refinery stock was replaced by Sun Pharma, a domestic pharma company which is witnessing increasing market activity.

Earlier this month, The Bombay Stock Exchange had jettisoned two stocks NIIT and Mahindra & Mahindra and replaced them with HCL Technologies and Hero Honda.

In the Nifty, the new entrant Wipro now(as on 30 January) has the second largest weight