total return index nifty

The returns from holding a stock could come through various ways.
1. Capital Appreciation (the stock price going up)
2. Splits, bonus, and rights at a discounted rates
3. Dividends
4. Shareholder promotional schemes. (Reliance stock holders get discount at Raymonds, Apollo hospital shareholders get rebates for medical treatment etc)
Almost all indexes (Sensex, S&P CNX Nifty etc) take care of the first 2 return. It is hard to put a monetary figure to the fourth because many of these schemes are never exercised or are little more than advertizing channels.
However Dividends are not taken into account when Index is computed and yet they are not insignificant. During the bear market period, the Nifty dividend yield was about 2% (as per NSE website ) it is 1.09% on 28th Aug. In evaluating a long term portfolio, ignoring this value could be serious.
Interestingly all mutual funds while advertizing their performance would assume that dividends from the mf are reinvested, yet Nifty/Sensex benchmarks are not adjusted. This introduces a bias of 1-2% in returns.

NIFTY Total Return Index does adjusts for dividends, but unfortunately one has to pay to access it.

Advertisements

Leave a Reply.... we want your views

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s