Bitter truth of SIP investment
SIP and mutual funds are always said to be the safest and diversified way of investment. Investors are advised that risk can be reduced by investing money in different sectors and different funds. But the figures till June 2026 show a different picture. The weightage of only five companies in the country’s largest stock market index Nifty 50 has reached 41%. That is, if an investor is investing money in Nifty 50 index fund or ETF, then out of every Rs 100, about Rs 41 is being invested only in five stocks like HDFC Bank, Reliance Industries, ICICI Bank, Bharti Airtel and Infosys. This trend is not limited to indexes only. Foreign investors (FPIs), large mutual funds, LIC, EPFO and even the F&O market have a large stake concentrated in a few select companies. In such a situation, the question arises whether crores of investors are really getting a diversified portfolio or despite investing in different names, the money is ultimately reaching the same few shares? If there is a big fall in these shares, it can affect almost every investor simultaneously. Therefore, it is important to understand how big the risk of concentration is in the current investment system and what investors can do to avoid it.
The number of SIP investors is continuously increasing in India and crores of people are investing in the stock market through mutual funds every month. There are about 11 crore active SIP accounts. Most investors feel that by buying different funds their money gets divided among many companies. But the reality is that the top holdings of most of the big funds are almost the same. Companies like HDFC Bank, Reliance Industries, ICICI Bank, Bharti Airtel and Infosys are included in almost every major large cap fund and Nifty 50 index. This means that whether the investor buys index funds, large cap funds or invests through EPFO, a major part of it ultimately ends up in those selected stocks. This is the reason why if there is a sharp decline in any one big stock in the market, its impact is visible on the portfolios of millions of investors simultaneously.
1. Why has concentration increased in Nifty 50?
According to the data of June 2026, only five companies dominate the Nifty 50 index. The weightage of HDFC Bank is 14%, Reliance Industries is 9%, ICICI Bank is 8%, Bharti Airtel is 5% and Infosys is 5%. That means these five companies together hold 41% of the entire index. If an investor invests Rs 1 lakh in NIFTY 50 ETF or index fund, then about Rs 41 thousand gets invested in these five companies only, while only Rs 59 thousand goes in the remaining 45 companies. This means that there are definitely 50 shares in NIFTY 50, but the movement of the index largely depends on the performance of some big companies.
2. Not only Nifty, this is the trend in the entire market
This concentration is not limited to Nifty 50 only. Figures for June 2026 show that the major stake in the foreign investors (FPI), large cap mutual funds, LIC, EPFO and F&O market is concentrated in a few select companies only. The weightage of top 5 companies in Nifty 50 and EPFO ETF is 41%, while in large cap mutual funds it is 42% and in LIC’s portfolio it is 35%. The highest concentration is seen in the F&O market, where 65% of the trading is done in just five stocks. It is clear from this that the money of different investors and institutions is ultimately reaching those few big shares. In such a situation, if there is a big fall in these shares, it can affect the entire market and the portfolio of crores of investors simultaneously.
3. Is diversification becoming just an illusion?
Market experts believe that merely buying different mutual funds is not diversification. If the top holdings of all funds are the same then the investor’s risk does not reduce. Many investors have 5-6 mutual funds, but the top 10 stocks in them turn out to be almost the same. In such a situation, the portfolio appears big, but the risk remains only on a few companies.
4. What changes can regulators make?
- Along with NIFTY 50, Equal Weight Index should also be made the main option.
- There should be less dependence on market cap based index only in ETF investment of EPFO.
- Minimum mid cap exposure should be fixed in equity mutual funds.
- There should be a maximum limit on the turnover of any one share in the F&O market.
- Regular stress test should be made mandatory for large cap funds also.
- The liquidity capacity of the fund house should be checked from time to time.
5. What can investors do themselves?
First check your portfolio- If you have multiple mutual funds, then find out the top 10 holdings of all of them. If 7-8 stocks constitute 35% or more of your total investment, your portfolio may be overconcentrated.
Do not depend only on Large Cap- You can consider starting a new SIP in Flexi Cap, Multi Cap or Multi Asset Fund. This increases investment in different sectors and companies.
Also keep an eye on Equal Weight Index- In the normal Nifty 50, big companies have more weight, whereas in the Equal Weight Index, all 50 companies have almost equal weight. This reduces dependence on some selected shares.
Invest abroad also- Keeping 10-15% of the portfolio in Global Index Funds or International Funds can reduce dependence on the Indian market only.
Give place to gold also- Experts recommend keeping 10-15% of the portfolio in Gold ETFs or other gold investment options. Gold can help in reducing risk during high market fluctuations.
SIP and mutual funds are still effective means of long-term investment, but just buying different funds is not enough. Investors should also see which companies their funds are investing in. If despite different schemes, money is going into the same 5-10 stocks again and again, then real diversification is not happening. In such a situation, it has become more important than ever to review the portfolio from time to time, keep an eye on investment and concentration in different asset classes.
Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money-related decisions.
