Nifty 50 Index vs Nifty Next 50 vs Nifty 500 Index – A Beginner’s Guide

The moment you dive into index investing, you will see indices like the Nifty 50, Nifty Next 50, and Nifty 500 index. They’re everywhere, mentioned in financial news, stock tips, and investment blogs. But what exactly are they? Are they just names on a chart, or is there more to the story? 

Each is a benchmark index, tracking a carefully selected basket of stocks, but they don’t all tell the same story. Each index is like a different lens. One zooms in on the market leaders, another spotlights the contenders waiting to break through, and the last one? It captures the broader market pulse. Still thinking, is Nifty 50 part of Nifty 500? What are the key differences between Nifty 50 and Nifty 500? 

In this guide, we’ll break it down without jargon, explain what these indices really mean, how they’re built, and why they could shape your investing journey in more ways than one.

What is an Index in the Stock Market?

A Stock Market Index brings together a basket of stocks representing a specific segment of the market. The segments can encompass large-cap giants, fast-moving mid-caps, or encompass the entire sector.

But its purpose is consistent: to act as a benchmark, a measuring stick, a barometer of how a chunk of the market is doing at any given time.

You don’t need to track every heartbeat to know someone’s alive; you check the pulse. That’s what an index does for the market.

Take the Nifty 50, for instance. It bundles together 50 of India’s largest, most valuable companies. When the Nifty 50 surges, it suggests these corporate powerhouses are thriving. When it slumps, there’s turbulence beneath the surface. It doesn’t spell out the full story, but it does hint at the direction. And in investing, even a hint can mean everything.

Nifty 50 – India’s Benchmark Index

Nifty 50 is the most tracked and most talked-about index in India. It comprises the first 50 companies ranked by market value on the National Stock Exchange (NSE). These are India’s top 50 largest companies by market capitalisation, considering only the shares that are freely available for trading. These are the market leaders from various sectors like banking, IT, FMCG, and energy. Together, these companies account for approximately 55% of India’s total market capitalisation.

Why It Matters

Nifty 50 serves as the benchmark index for the Indian equity market. Mutual funds, equity ETFs, and portfolio managers all use it to get a sense of how their investments are performing. To “beat the market” is to perform better than the Nifty 50 Index over a specific period.

Nifty 50 is also a measure of overall investor sentiment and direction for the Indian economy. It is made up of companies from different sectors providing comprehensive insight into the market. When the Nifty 50 moves up or down, it’s often seen as a signal of how the broader market, and by extension, the economy, is performing. The indices serve as a foundation for various investment products including index funds, options, and futures and is therefore a mainstay for passive and active investors.

To retail investors, Nifty 50 provides exposure to India’s largest companies within a single investment vehicle with lower risk than selecting individual stocks.

Should You Invest in It?

If you’re looking to put your money into India’s most credible and established companies, the Nifty 50 is a good place to start. By investing in the Nifty 50, either through index funds or exchange-traded funds (ETFs), you will automatically have exposure to 50 of India’s best companies from a variety of sectors. 

The Nifty 50 is particularly good for:

• Long-term investors who want to generate stable and consistent returns without having to manage an equity portfolio actively.
• First-time investors, new to the stock market, exploring index investing, and looking for a low-risk way to start creating wealth.
• Those seeking market-level returns, since Nifty 50 reflects the overall performance of the Indian stock market.

Nifty Next 50 – The Upcoming Giants

The Nifty Next 50 tracks companies ranked 51 to 100 by market capitalisation, right behind the Nifty 50. They haven’t made it to the main stage yet, but they’re not far from it. Together, these companies account for approximately 10% of India’s total market capitalisation. These are the contenders, the rising names gearing up for the big leagues. Many companies that now anchor the Nifty 50 like HDFC Life or Divi’s Laboratories once sharpened their edge right here. Today’s Nifty 50? It was yesterday’s Nifty Next 50.

More Growth Potential and More Risk

Even though Nifty Next 50 companies are smaller than Nifty 50 companies, they tend to grow faster. This growth potential comes from expanding market share, new product innovation, or tapping into underserved markets. However, with higher growth comes greater volatility. These stocks can swing more sharply in response to market trends or sector-specific developments. The index is populated with dynamic players across pharma, chemicals, consumer durables, and specialised financial services, all sectors that are prone to change. For investors, while this means more opportunity, it also means more unpredictability.

Who Should Consider It?

For individuals who are comfortable with market fluctuations and are looking for long-term growth, Nifty Next 50 may be a good option. It is made for:

• Those who want to invest in possible future blue-chip companies.
• People who want more exposure to sectors not covered by the Nifty 50.
• Investors who want more mid-cap exposure with greater variety and less overlap of their large-cap holdings.

If you’re willing to take on more risk in exchange for the chance of higher returns, this index can be a smart addition to your equity strategy.

Nifty 500 – The Big Picture Index

Nifty 500 is probably the largest stock market index in India. It comprises the top 500 companies listed on the National Stock Exchange (NSE) and is representative of about 96-97% of India’s total market capitalisation. So, you can think of the Nifty 500 as a snapshot of nearly the entire stock market.  

The Nifty 500 gives you a fair picture of how well the large-, mid- and small-cap companies are performing across multiple industries. It is a consistent metric to evaluate the health of India’s economy.

Full Market Exposure

This index doesn’t pick favourites. It rolls together:

• The giants of the Nifty 50
• The up-and-comers from the Nifty Next 50
• Additionally, there are 400 more companies spread across mid-cap and small-cap segments.

From household names to hidden gems, the Nifty 500 gives you a front-row seat to every part of the action.

If you want a clear, detailed picture of how India’s stock market is doing, this is your index. It comprises not just the top players, but the entire team. With exposure across sectors, industries, and market caps, the Nifty 500 mirrors the broader economy better than any other index.

Who Should Consider It?

The Nifty 500 can be a smart choice for:

• Passive investors looking for full market exposure without picking stocks. 
• Long-term investors who wish to grow their money over a long horizon by taking advantage of the market’s growth. 
• Risk-conscious investors looking to distribute their money across many companies to avoid over-reliance on a small number of companies.

If you’re looking for wide coverage, steady performance, and a clear view of India’s economic journey, this index ticks all the boxes.

Key Differences Between Nifty 50, Next 50, and Nifty 500

Let’s look at how they compare across the most important parameters:

Is Nifty 50 Part of Nifty 500?

The Nifty 500 is not an independent universe but an extended version of the Nifty 50 and Nifty Next 50. It is intended to capture the top 500 companies on the NSE, ranked by free-float market capitalisation.

The structure works like this:

• Nifty 50 contains the top 50 companies.
• Nifty Next 50 contains the next set, ranked 51 to 100.
• Nifty 500 combines the Nifty 50 and Nifty Next 50 and adds another 400 names from the mid-cap and small-cap universe.

Nifty 500 gives you access to large-cap giants, high-growth up-and-comers, and a wide mix of companies across industries, all through a single investment.

Sector Tilt: Where are Your Favourite Industries Taking the Lead

Not all indices weigh sectors the same. The Nifty 50 leans heavily on banking, IT, and energy. The Next 50 brings in more action from sectors like pharma, chemicals, and consumer durables. And the Nifty 500? It’s a full-spectrum mix, with everything from large-cap giants to small-cap disruptors. So, if you’re bullish on a specific industry, choosing the right index lets you tilt your portfolio in that direction.

The details of the sector-wise bifurcation of the Nifty 50, Nifty Next 50, and Nifty 500 index indices are:

For example, if you’re positive about FMCG and not so keen on IT, the Nifty Next 50 might suit you better. You can also use the table above to help choose the right index based on the sectors you believe in.

Which One Should You Invest In?

There’s no single right answer; it depends on your goals and situation. If you’re seeking stability and lower volatility, the Nifty 50 is the ideal choice for you. It’s steady, familiar, and gets the job done without much noise. 

On the other hand, if you’re willing to take on a bit more risk for the possibility of higher returns, the Nifty Next 50 offers a front-row seat to companies on the verge of breaking into the Nifty 50. 

Then there’s the convenient 500, the all-in-one, complete-market buffet. It’s broad, it’s diverse, and gives you exposure to everything from large caps to small-cap sleepers, making it ideal for long-term, passive investors who want their portfolio to mirror India’s economic story. 

And if you can’t pick one? Mix it up. You can split between Nifty 50 and Next 50. It can give you a balanced combination of both safety and growth. Or just go with the Nifty 500 and call it a day. The point is, choose what fits your comfort, your goals, and how wild (or chill) you want your investing journey to be.

Final Thoughts

Each index is useful in its own way and works well for passive investing. You don’t have to overthink it – just go with what suits your comfort level and goals. Every day is a chance to learn and grow your portfolio. The important thing is to get started and stay consistent with your investments.

At Share.Market, we’re here to guide you with easy-to-understand blogs and videos made for investors like you. With the right mindset and the right tools, building long-term wealth becomes a lot more achievable. So take that first step and keep looking ahead.

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