A Comparative Analysis of Return, Risk, and Wealth Creation of Market and Dividend Portfolios in India

Abstract

Background: Equity investment in India has matured considerably over the past two decades, with both retail and
institutional participants gravitating toward distinct portfolio strategies based on their return expectations and risk
tolerance. Two such strategies — broad market index investing and dividend-oriented portfolio investing — have
attracted substantial interest from researchers and practitioners alike. While the former replicates the performance of
a comprehensive market index and targets capital appreciation, the latter concentrates on financially robust, dividendpaying
firms that offer both periodic income and relative stability. Evaluating the long-run comparative performance of
these strategies holds meaningful implications for investors, portfolio managers, and financial researchers navigating
India’s evolving capital market.
Methods: This study undertakes a rigorous quantitative risk-return comparison between Nifty BeES — a proxy for the
broad Indian equity market — and Nifty Dividend ETF — representing a dividend-focused passive strategy — covering
3,210 common trading-day observations from 21 April 2014 to 27 February 2026, a span of approximately 11.85 years. The
analytical framework employs an extensive battery of performance metrics, including the Compound Annual Growth Rate
(CAGR), terminal wealth accumulation, annualised volatility, beta, Sharpe ratio, Treynor ratio, Jensen’s Alpha, Maximum
Drawdown, Sortino ratio, Calmar ratio, Value-at-Risk (VaR), Conditional VaR (CVaR), and distributional statistics. Six formally
stated hypotheses are tested through appropriate statistical procedures: an independent-samples t-test, Levene’s test for
variance equality, the Jobson-Korkie test for Sharpe ratio equality, a paired t-test on cumulative wealth paths, the Mann-
Whitney U test for downside protection, and a rolling Sharpe-based t-test for cross-cycle consistency.
Results: The Nifty Dividend ETF posted a CAGR of 14.08%, against 12.79% for Nifty BeES, with terminal wealth accumulation
of ₹4.77 per rupee invested compared to ₹4.17. The dividend portfolio also exhibited lower systematic risk (β = 0.854),
stronger risk-adjusted performance (Sharpe: 0.9077 vs. 0.8169), a positive Jensen’s Alpha of 2.81%, and a shallower
maximum drawdown of −35.05% versus −38.37%. Hypothesis tests confirm statistically significant differences in riskadjusted
performance (H03), wealth creation (H04), and downside protection (H05), while finding no significant divergence
in average daily returns (H01), overall risk levels (H02), or cross-cycle consistency (H06). Taken together, the evidence supports
the proposition that dividend-oriented passive investing in India yields a superior risk-return trade-off over the long run.
Conclusion: Over the eleven-plus years under review, the Nifty Dividend ETF generated more efficient wealth accumulation
and stronger downside resilience than the broad market ETF. These findings suggest that dividend-focused passive investing
represents a viable long-term strategy in Indian equities, particularly for investors who prioritise risk-adjusted returns and
capital preservation alongside growth.