Get a Fix on Nifty Total Returns Index

Nifty total returns index closed at 8727 on April 4

MUMBAI: CNX Nifty closed at 8727 on April 4. Those who track Indian stock markets closely would raise their eyebrows and quickly correct: No, Nifty closed at 6676 on that day. However, Nifty did really close at 8727 on that day, if one also includes the dividends paid out by the companies that form the index.

The Nifty total returns index (TRI) closed at 8727 on April 4. It might raise another question: how does it matter? It really does as most investors and experts typically evaluate the performance of their equity portfolios or mutual fund schemes by comparing them with the movement of the respective benchmark index during the same period. However, many experts believe that the TRI is a better yardstick to measure the performance of a fund or portfolio.

“Total return index is a better benchmark as it accounts for dividends in addition to the price movements. An active fund manager is expected to generate returns in addition to total return index, after accounting for the scheme expenses,” says Vikas V Gupta, EVP- traded markets & investment research, Arthveda Fund Management.

For the beginners, an equity investor is rewarded in two ways — capital appreciation and dividend. Capital appreciation is provided by the gain in stock prices. Besides, equity investors receive dividends.

While the CNX Nifty only captures the price movement, TRI measures capital appreciation and dividends. Nifty has given a capital appreciation of 20.08 per cent, while Nifty TRI gave 21.6 per cent returns last year.