DSP BSE Sensex Next 30 Index Fund NFO review: A smart opportunity

DSP Mutual Fund has launched an index fund and an ETF (exchange-traded fund) , both designed to track the BSE Sensex Next 30 index. Investors with a demat account can choose the ETF route, while those without one can opt for the index fund.

As the name suggests, this passive fund will invest in the 31st to 60th largest companies by free-float market value on the Bombay Stock Exchange.

The new fund has been open for subscription since January 10, 2025, and will remain open to the public until January 24, 2025.

About DSP BSE Sensex Next 30 Index

Since DSP's new fund will passively copy what the BSE Sensex Next 30 index is doing, let's get to know the latter better.

• The BSE Sensex Next 30 index was introduced just last year.
  
• The Sensex showcases the top 30 giants of the stock market, ranked by their free-float market capitalisation. The BSE Sensex Next 30, as the name suggests, is the league of the next 30 companies.
  
• The index is reconfigured twice a year, once in June and then in December.

Top five companies in the index

• Trent (6.2 per cent weight)
  
• Oil and Natural Gas Corporation (4.4 per cent)
  
• Bharat Electronics (4.2 per cent)
  
• Bajaj Auto (4.2 per cent)
  
• Jio Financial Services (3.9 per cent).

The top five companies in the index collectively hold around 23 per cent of the total weight, while the top 10 contribute close to 42 per cent.

Compared to other large-cap indices like the BSE Sensex, BSE 100 and Nifty 50, this indicates a relatively lower concentration in a few stocks, which, on paper, is a good thing.

Under-representation of Sensex Next 30 companies
The Sensex Next 30 index and the Nifty 50 have 21 stocks in common, but these company stocks make up only 16 per cent of the total weight in the Nifty 50.

Similarly, the Sensex Next 30 stocks account for just 17.4 per cent of the total weight in the BSE 100.

This highlights that stocks ranked 31 to 60 are under-represented in other large-cap indices, making this index a valuable opportunity to gain focused exposure to these stocks.

Sectoral break-up
The BSE Sensex Next 30 has a more democratic sectoral spread. None of the sectors has more than 18.4 per cent representation, suggesting no sector is overly dominant.

BSE Sensex Next 30 Returns

Since this index was launched less than a year back, there isn't enough historical data to assess its rolling returns for consistency.

However, based on backtested trailing returns provided in the factsheet, the BSE Sensex Next 30 index has beaten both the BSE Sensex and its parent index, the BSE 100, over various time horizons.

DSP BSE Sensex Next 30 Index: Should you invest?

• This index gives you a slice of the 30 biggest companies just beyond the Sensex, with the added perk of being less concentrated in a few top stocks.
  
• Even better, it also delivered slightly better returns than its peers.
  
• But should you dive in? Well, the index is still a newbie, launched only last year, so there's not enough data to judge its consistency just yet.
  
• That said, it packs a punch with some of India's top companies in its lineup. If you're looking to spice up your portfolio, consider giving this index a small spot - it might just be worth it!

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