In the chart above, we see that inside the Financial Services sector the HDFC group has a 16.1% allocation out of the total 33.3% allocated to this sector. Does this story repeat in Oil and Gas Sector? Let us see –
Again, the same story repeats here, or it gets even worse. Of the 16.7% allocated to the Oil and Gas sector, Reliance holds 14.9%. This is a pretty one-sided allocation. There is no need to mention that even a small change in the share prices of Reliance Industries or HDFC Bank shall have a major impact on the Nifty 50 Index. Below are the Top 10 Constituents of Nifty 50 (As on 30th Sep 2020) –
For a portfolio having 50 constituents, 24.6% allocation to the top 2 constituents is huge. This further strengthens the thought if Nifty 50 is a real market indicator? But so far it is still a very popular index used and followed in India.