Nifty 50 vs Nifty Next 50: What Is the Difference?

Nifty 50 includes the fifty biggest and most traded companies on the National Stock Exchange, across banking, IT, energy, consumer goods and more.

Nifty Next 50 includes the fifty companies ranked just below them. Many are large, well-known businesses that are growing towards the top fifty. Some eventually move up into the Nifty 50, and some move down.

Together, the two make up the top hundred companies, which is roughly what large cap means. Our page on large, mid and small cap funds explains the size bands.

The Nifty 50 is generally steadier, because it holds the largest and most established companies.

The Nifty Next 50 has usually swung more, both up and down. In strong markets it has at times done better. In falls it has often dropped further. It also tends to have periods where it lags the Nifty 50 for a while.

This happens partly because companies in the Nifty Next 50 are smaller and still growing, so their prices react more to news, results and changes in the economy.

That is the trade-off. Our page on risk and volatility explains why bigger swings need a longer holding period.

In the Nifty 50, the top few companies carry a large share of the index. A handful of big names can move the whole index.

The Nifty Next 50 is spread more evenly across its companies, but it also has sectors that can be heavily represented at times. Both indices change their make-up regularly as companies grow or shrink.

Checking the fact sheet for the top holdings and sector weights is worth a minute, as our page on the fact sheet explains.

Both are available as index funds and as ETFs, and both are usually low cost compared with active funds.

When comparing funds on the same index, look at the expense ratio and the tracking error, which measures how closely the fund follows its index. Our pages on expense ratio and tracking error cover both.

An index fund needs no demat account. An ETF does. Our page on ETF versus index fund covers the choice.

Nifty 50 as the core: many investors use it as the main equity holding because it is broad, steady and simple.

Nifty Next 50 as an add-on: a smaller slice for extra growth potential, accepting more swings.

Only Nifty Next 50: possible, but it is a more volatile choice and not usually the first index fund for a beginner.

It depends entirely on the period you look at, and that is the honest answer.

There have been stretches where the Nifty Next 50 did clearly better, and stretches where it lagged the Nifty 50 for years. Anyone who shows you only one period is showing you half the story.

We do not publish return projections. If you want to look at history yourself, our backtest tool lets you compare periods, and our page on what CAGR is explains why the chosen dates change the answer so much.

Holding both gives you the top hundred companies. The two do not overlap, because each company is in only one of the indices at a time.

That makes them a neat pair. The split between them is a personal choice about how much extra swing you are comfortable with. Our page on how many funds to hold explains why two complementary funds can be better than several similar ones.

Nifty 50 suits almost anyone starting with index funds, and anyone who wants a simple, low-cost core that follows the biggest businesses in India.

Nifty Next 50 suits someone who already has a core, has a long horizon, and can stay calm through bigger falls. It is not a place for money needed in the next few years.

Some people compare a Nifty 50 index fund with an active large cap fund. The index fund simply copies the index at low cost. An active fund tries to beat it, at higher cost, and may or may not succeed.

Our pages on large cap fund versus index fund and active versus passive funds cover this in detail.

Both indices are reviewed regularly, and companies are added or removed as their size and trading change.

A company that grows strongly can move from the Nifty Next 50 into the Nifty 50. One that shrinks can move down. An index fund follows these changes automatically, so you do not need to do anything.

This is one of the quiet advantages of an index fund: it keeps itself up to date with the market, at low cost, with no decisions required from you.

Both work well with a monthly SIP, especially the more volatile Nifty Next 50, where buying regularly helps smooth out the swings. Our page on rupee cost averaging explains why.

Give either one years, not months. Short periods tell you very little about an index fund, and switching between the two based on which did better last year usually means buying whichever one has just had its good run.

• Nifty 50: top fifty, steadier, a common core holding.
• Nifty Next 50: next fifty, more swings, often an add-on.
• Both together: the top hundred, with no overlap.
• Compare expense ratio and tracking error within each index.

We are distributors rather than investment advisers and we recommend no schemes. If you want help deciding how index funds fit your plan, get in touch.