Comparative Analysis of Nifty Indices: Performance, Volatility, and Valuation Metrics

Abstract

The study "Comparative Analysis of Nifty Indices: "A Performance, Volatility, and Valuation Metrics of Various Nifty Indices" assesses the short and long-term movements in some key Nifty indices to understand their risk-reward offerings. To quantify returns, the research uses the Index Dashboard data as of December 2024, making calculations based on monthly, three-month, yearly, three-year, and five-year periods. Then, the risk measures, including volatile, beta, and correlation factors, are measured to analyze the risks faced; furthermore, the indexes valuation is done by the P/E; and P/B ratios. A similar result is obtained by applying a paired t-test to compare short-term and long-term returns, whereby the superiority of the rates in long-term investments is evidenced. Indeed, the Kruskal Wallis H test for testing diversification across the indices of volatility does not show much cross-volatility, which means that cross-volatility-based diversification may not be very significant. The correlation analysis has revealed that most of the linked Nifty indices mainly reflect the general market and provide relatively meager diversification advantages. However, their indices that have lower market correlations represent good opportunities for diversification. The results do stress the issue of choosing indices with good return characteristics and comparatively low variability for portfolio stability in the long run. This study helps the investors and policymakers to know about the Nifty indices' performance and about the risks associated with them which leads to better investment and market planning of the companies.