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What is Nifty 50 and Sensex: Index Funds vs ETfs | Nifty 50 | Nifty Next 50 | Nifty Alpha 50 | Hindi - YouTube
Channel: Groww
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Friends if I talk about index
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like Nifty 50 or many other indices about which you might not know
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In this video, we will talk about different Indices about which an investor should have some idea
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Other than this, friends, I am going to make today's video very interesting
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In the last few days, or years' America's investment on indices has increased
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Why did that happen?
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Why investors who were interested in buying a particular share or two are now moving towards investing in Indices?
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Why is ETF becoming so famous in the last few years'
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What is the reason behind it? What is Index? How does it work?
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How did the popularity of Index and ETF go up?
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As an investor how does it impact you?
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which could be very useful in your investment planning
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I, Jagdeep Singh, Welcome you to the Groww Youtube Channel
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Let's start with today's video
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I will divide this video into different parts
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But before starting the video, if you have not subscribed to Groww's Channel yet
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the Subscribe it!
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so that you don't miss out on any of our videos
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so let's start with, what is an Index?
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So if I give an example of an Index
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then Nifty 50 and Sensex, what are they and how were they made?
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These are Indices which derives their value from 30 to 50 different companies
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which was joined in order to create a particular index
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If I give an example of Nifty 50
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Nifty 50 comprises of 50 companies which are allocated different weightages
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and the value derived from it is the overall price of the Nifty
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If I talk about the current value of Nifty
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then Nifty's value is of Rs.10768
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This value has been derived from 50 different companies which have been given different weightages
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Now, assume the highest value in Nifty has been given to Reliance at around 13%
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When the value of Reliance goes up, the overall value of Nifty goes up
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by the percentage of weightage assigned to it
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If I talk about Sensex
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the Sensex comprises of 30 companies, mostly large-cap companies
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The weightage of the company is given on the basis of free-float market capitalization
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How much is the market cap of the company? The more the market cap, the more the weightage
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Now I will tell you a one more interesting thing
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If I talk about Nifty 50's total market capitalization
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then it is total companies listed on NSE's 66% market capitalization
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which means it gives you a fair idea about all the companies listed
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Other than this, If I talk about the top 2 indexes of any country
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It is seen as an economic barometer
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which implies how the economic activities in the country is happening
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Like you know, when recession or downturn comes, the whole economy goes down
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then all companies share prices also start going down
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At the same time, If you see any index, then even their prices would have started going down
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So like a barometer, it tells you, how are the economic activities performing in a particular country
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If it is good then the Index normally goes up
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If it is not good, the index usually goes down
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Friends, In the first part, I told you what is Index
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If you feel in the coming time, Nifty's prices are going to go up then how can you take benefit out of it
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How can you invest in it
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So friends if I talk about investing in Index, there are mainly two ways
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First is Index mutual funds and second is of ETF
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I want to tell you the benefit on why any investor would think of investing in Index
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If I talk about the benefit of Index then you get exposure to different companies at a time
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Now if I talk about MRF
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Now if you want to get exposure in MRF in equity market
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if you invest in their share price
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then you will have to invest around Rs. 70000
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But if you have to make an investment in small ticket then via an index you can exposure in different countries
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whose share prices are very high and you cannot afford it as a investor
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Friends, this is the benefit of investment in Index
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Now I will talk about two investment options, first I will talk about index mutual funds
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Secondly about ETF
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what are the benefits of investing in both
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One more interesting thing we will discuss here is the history of ETF
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How did ETF become so popular in the recent time
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and how do you think it will perform in India?
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Now, friends, I will talk about Index mutual fund
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If you invest in index mutual fund, assume if you choose an index mutual fund which tracks Nifty 50
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then all of your money with EMC for that particular mutual fund
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then that particular mutual fund manager, like the consolidated Nifty
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It invests money in the same weightage and percentage in different stocks
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and it tries the returns coming out of Nifty comes out of a particular mutual fund
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so that if you are investing in any mutual fund, the biggest benefit is that you receive the same benefit
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which Nifty 50 gives you
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Other than this, there is another small benefit of investing in the index mutual find
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You won't face problems of liquidity here
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If I talk about liquidity then if you are investing Rs. 5k or 10k then you can remove it at any point of time
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If you want to withdraw your money after one year then you can withdraw it at any given time
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Guys, If I talk about the charges if investing in index mutual funds
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and other charges to invest in large-cap mutual funds
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there is a huge difference between these two
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to invest in Index mutual funds, the charges are very less
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the important reason behind it is when you invest in large-cap
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your fund manager has to research and choose stocks to invest
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so that a good return can be obtained from here and can outperform its benchmark
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If I talk about Index, the fund manager already knows which stocks he wants to invest in
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cause of which his research charges and other costs get reduced, this benefit is passed on to the investor
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I would like to again tell you that our index mutual funds expense ratio is way lesser than other mutual funds
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Friends, Now I will talk about ETF
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Exchange-Traded Funds
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which is very famous in US
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I would like to discuss its history on how did ETF get famous
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If I talk about its popularity, the ETF started gaining popularity from 2008
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From 2008, financial crisis, people's interest in ETF has gone up
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Now I will give you an example which will tell how analysts are predicting the future of ETF
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The example is of an analyst from Bank of America
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He tells us that by 2030, the index market will touch 50 trillion dollars
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which is a really big no.
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So friends if I read out his whole statement
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He writes...
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According to him by 2030, ETF would be a 50 trillion dollar industry
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the reason behind it is people moving from active investing to passive investing
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Passive investment means they don't want to invest in one particular share but want to invest in a particular theme
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Other than this, they believe the biggest benefit in ETF is the tax efficiency
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the costing is less in it and has increased transparency
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that is why there are chances of a rise in ETF market in US as well as in other developing countries
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Friends, I spoke about the US, If I talk about India on how the current ETF market in India is growing?
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If I compare today's ETF market with 2015's then you can see an increment of 1000%
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which means there has been tremendous growth in the last few years
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If I give you an example then ETF's AUM was of Rs.13800
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but if I talk about May 2019, from Rs. 13800 Cr, it has reached Rs.1,41,500 Cr
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then you can imagine the growth in no. of people investing in ETF
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If I talk about a common investor, between ETF and Index which one should he choose
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then from the cost basis, ETF outperforms Index mutual fund
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but in Indian market, there is still some liquidity problem when it comes to ETF
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cause of which index does better than ETF in India
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If I have to say something positive about Index mutual fund then
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for a common investor, there won't be any liquidity problem
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Whenever you want to sell and withdraw money, you can
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Friends, after this I come to video's last face wherein
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I will explain the three indices, every investor should know about
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First, Nifty 50, about which 90% to 100% investors would know about
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If they don't know about its composition then they will at least know its value
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Friends, if I talk about Nifty 50's composition
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then the most weight is given to its financial services at 38.38%
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Secondly, the Oil & Gas sector at 14.76% in which Reliance is a big player
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If I talk about weightage, the weightage wise Reliance is the highest at 12.45%
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After Reliance is HDFC bank, it's weightage is at 12.56%
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The name of the second index is Nifty Alpha 50
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What is the meaning of Alpha here
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and you might have heard of Alpha many times, but could not have understood the meaning
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Many times you might have heard that this particular fund manager has raised more Alpha
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Alpha is positive, What is it's meaning?
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Alpha here shows as if you have invested in a particular share and I compare it with market
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so in comparison with the market, how much has the asset outperformed
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Like say you invested in stock A which gave you a return of 20%
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now say the overall market gave an investment of 10%
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then your Alpha is of 10% which means by 10%, the stock has outperformed the market
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If we talk in detail on Nifty Alpha 50
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then it launched in November 2012
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and this index has given a CAGR return of 18.32%
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which means this particular index has outperformed Nifty 50
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Friends, If I talk about its composition
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then the highest weightage has been given to Adani green energy at 6.27%
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Friends, after Adani Green group, Naveen Fluorine International Ltd has 3.59%
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Abbott India has 3.33% and more
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so you can see how well this particular index has outperformed
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and it contains companies which have more Alpha than others
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Friends, the next and third last index
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The name of it is Nifty Next 50
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Now you would like to know, what is Nifty Next 50?
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then friends, you might know about N 100, Nifty 100 companies
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which tells us, which are the top 100 companies in India
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from that top 100, if I pick the first 50, it makes Nifty 50
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The top 50 companies are called Nifty 50 and the rest is called Nifty next 50
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Now, why is Nifty Next 50 so important for any investor?
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So, friends, you might know in Nifty 50, some stops keeps getting added and some get subtracted
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But in Nifty 50, the stock which got added is majorly from Nifty top 50
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Like for example, Shree Cement was added in Nifty 50 which was earlier in Nifty Next 50
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So If you analyze well, Nifty top 50 can tell you which is the stock that can move to Nifty top 50 in the coming times
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Friends, Nifty Next 50 was launched in 1996
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From inception till now has given a CAGR return of 14.71% which is considered to be good
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If I talk about weightage, highest weightage has been given to financial sector
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Secondly, consumer goods then pharma sector
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If I talk about companies then the highest weightage is given to HDFC Life insurance company
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Avenue Supermart, SBI Life Insurance company, Divis Laboratories Ltd
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These companies tell us which company has been given the highest weightage in Nifty Next 50
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Friends, I hope you might have liked this video
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If we have taken any company's name in the video then it is only for educational purposes
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We never advise you to invest in a mutual fund or a particular stock
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We create videos purely for educational purposes
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If you liked this video
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Press Like!
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Suggest us, which topics should we make videos on in the future?
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Other than this, If you have any doubts regarding investment
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then you can ask us in comments with #AskGroww
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We will try to answer every question of yours
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Cause we add 3,4 videos on educational purposes every week to help you to become a good and an intelligent investor
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Happy Investing!
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