I invested in a Nifty index fund, but have not received any dividends from the fund despite several of the Nift companies declaring dividends. Where does this dividend go?
- Ram Khanna
It is true that most of the Nifty and Sensex stocks do declare dividends and the dividend declared by stocks that the fund holds go back into the fund. This is reflected in the NAV. But because the quantum of dividends is very low, the dividend declaration does not result in a significant appreciation in the NAV.
The Nifty index comprises of 50 companies and at any given point of time only a handful would declare dividends. And hence the total effect on the fund's NAV will not be very significant. As for your fund declaring a dividend; it depends on the fund you have invested in and the option you have chosen. Many index funds do not have a dividend option. This means that any gains you wish to take will have to be obtained by redeeming the units. If you are invested in the dividend option of an index fund, you will need to wait for the scheme to declare dividends.
This article was originally published on February 11, 2011.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
