Hello,
Can i replicate BANKNIFTY returns by buying the stocks in the same proportion (weights) that the index has for its constituent stocks?
If yes, can someone help me how to go about the calculations to do that?
Thanks
Hi,
Keep in mind that the weightage of these index constituents keep changing so you’ll have to keep up with that. So, if the weightage of ICICI Bank goes up and Kotak Bank comes down, you’ll have to buy more shares of the former or sell shares of latter in order to accurately mirror Bank Nifty.
Also, some banks gets kicked out of the index (e.g. PNB) and new banks are brought in (e.g RBL Bank). In such cases, you’ll just have to sell the shares of the company that’s out.
Bottomline is that mirroring an index is not as easy of a job as you might think. I think it would be better if you pick a mutual fund (ETF) that follows Bank Nifty. I believe SBI has one.
-Neha (vrdnation.com)
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why u wnt t replicate BANKNIFTY …wht s attracting u in doing dat…
Hello,
I was trying to calculate if it makes sense in having a BANKNIFTY replicating portfolio and selling covered call against it every week in BANKNIFTY weekly options.
What is the kind of returns we can expect by doing this.
Thanks
I see that you are having unnecessary pessimistic views if someone is trying to replicate bank nifty on his own.
That’s a good try and may be even worth the effort if he feels he can do so. I know two-three traders who do double beta nifty portfolio mirroring in their portfolios and they have been successful in doing so.
@Dhruv_JC, I was not being pessimistic. I was just trying to educate the OP about the practical difficulties in replicating an index and making aware the cost associated with doing that.
BANKBEES
PSUBNKBEES
Check some other ETFs also available.
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wouldn’t it be better to buy bankbees ETF instead of buying individual stocks and trying to stay updated with the constituent of the index?
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I agree !