The Bank Nifty is better for trading and investors with a high risk tolerance. Whereas Nifty is better for investors with a low risk tolerance.
Nifty and Bank Nifty indexes serve as benchmarks for the Indian stock market. Nifty contains the top 50 NSE-registered companies in India, while the Bank Nifty represents the most liquid and well-capitalized banks. These indices represent the overall performance of the sectors they include.
Both Nifty and Bank Nifty are considerably safer for investment and both have their own pros and cons. Therefore, today we will discuss which of these two is better.
We will decide the best based on the following factors :
Bank Nifty only includes one sector—the 12 most liquid and well-capitalized banks, while Nifty contains the top 50 companies that are part of the best sectors of the economy, i.e., 14 sectors.
So there is more diversification in Nifty as compared to Bank Nifty.
The Bank Nifty is highly volatile as it contains only one sector, so changes in the banking sector will have a significant impact on the index as a whole. The Nifty, on the other hand, is less volatile.
Bank Nifty has produced a compound annual growth rate (CAGR) of 17.6 percent on price terms (PRI) over the past 22 years, while the Nifty 50 has produced a CAGR of 11.5 percent on PRI. This indicates that over the long term, the Bank Nifty has outperformed the Nifty.
Since Nifty has a lower risk factor, it is better for portfolio diversification and investors with a low appetite for risk. Whereas Bank Nifty is better for trading and investors with a higher appetite for risk.