Nifty 50 vs Nifty 500: Which Is Better

When you plan to invest in stocks or even mutual funds, it is common that you compare the options before you. But at the same time, there are certain benchmarks that you must consider to ensure that you are making the right investment decision. These stock market indices help you understand the broader view of the market in terms of performance. 

Of these, Nifty 50 and Nifty 500 stand out. Both these indices include the companies listed on the National Stock Exchange (NSE). Hence, these are considered benchmarks that help you understand the economy’s position well. 

The Nifty 50 tracks the top-performing large-cap companies. On the other hand, the Nifty 500 includes the large, mid, and small-cap stocks for a broader picture.

Knowing the difference between Nifty 500 vs Nifty 50 is essential before selecting an index fund or benchmarking your portfolio’s returns. So, let us explore all the details you need to make the investment call. 

What Is Nifty 50?

The Nifty 50 is one of the most commonly used index in India. This is the one which includes the top 50 large-cap companies. All these are listed on the NSE. The companies that are included are the ones which are known for their performance and stability. They have offered valuable returns to the investors, which makes them a true indicator of the sector’s health as well.

Key Features of Nifty 50

• Represents 50 leading large-cap companies on NSE.
• Covers around 55.48% of the total market capitalization.
• Acts as a benchmark for blue-chip and large-cap mutual funds.
• Share the highlights of overall performance.
• An insight into the economy’s performance.
• Proper review twice a year at a regular interval. 

What Is Nifty 500?

The Nifty 500 index tracks the performance of the top 500 companies. These are the ones listed on the NSE. Again, the selection is based on the market capitalization. But this includes large, mid, and small-cap companies for better representation of the overall economy. This is a diversified index which helps you have a better picture of the overall market.

Key Features of Nifty 500

• Represents the top 500 listed companies on NSE.
• Covers nearly 92% of total market capitalization.
• Has small, mid, and large companies.
• Best if you need a high level of diversification.
• Offers broader market exposure for better decision-making.
• Semi-annual review for accuracy and transparency.

So, it is clear that these two are great. But the Nifty 500 comparison offers you a more detailed insight. This is what you need when you want to make a portfolio that is well-diversified. This will be quite helpful and will ensure that you are investing in companies that are working well in the long run.

Read Also: Comparative Study on NSE v/s BSE: Differences, Similarities, and Popularity

Nifty 50 Vs Nifty 500 Explained

You now know the basics. Now, what is Nifty 50 vs Nifty 500? Well, this is something that will help you know each of these options better. You will be able to make the right investment call knowing these details. So, let us explore the difference better here. 

Parameter	Nifty 50	Nifty 500
Number of Stocks	Comprises 50 of the largest and most liquid companies on NSE.	Includes 500 companies across large, mid, and small-cap segments.
Market Representation	Covers around 55.48% of the total market capitalization of NSE.	Represents nearly 92% of NSE’s total market capitalization.
Market Segments Covered	Focus is on large-cap companies only.	Includes large, mid, and small-cap companies for better insights.
Volatility	Less volatile and more stable during market swings.	More volatile but has higher return potential in the long term.
Diversification	Limited diversification since it includes only top companies.	Offers wider diversification across sectors and company sizes.
Growth Potential	Offers consistent and steady growth.	Provides scope for faster growth due to mid and small-cap inclusion.
Risk Profile	Lower risk.	Higher risk.
Investor Profile	Better for beginners, conservative, and short-term investors.	Good for investors seeking long-term investment plans & Momentum.
Liquidity	High liquidity as it contains India’s most traded stocks.	Liquidity varies, especially among smaller companies.
Benchmark Use	Used as a benchmark for large-cap mutual funds and ETFs.	Used as a benchmark for multicap and diversified equity funds.
Review Frequency	Reviewed semi-annually to maintain top-performing large caps.	Reviewed semi-annually for overall market representation.

Which Is Better for You?

When comparing Nifty 50 vs Nifty 500, there is no right or wrong choice. You must be wondering why? Well, this is all based on your investment target and need. So, you must evaluate these two on certain aspects to see which one is a better choice for you. 

1. Risk and Stability

Nifty 50: It is one with lower risk as compared to the other. It considers the large-cap stocks only and so is expected to stay stable during market correction..

Nifty 500: It includes companies from the entire market. There are small, mid, and large-cap companies as well. This makes it highly sensitive and is also one where the impact of volatility can be seen at most.

Takeaway: Nifty 50 is better suited for investors who value safety and steady growth. But if you are ready to take the risk then Nifty 500 is better. Though you will gain in both but the latter is better for a high potential and volatile market.

2. Return Potential

Nifty 50: It is one that offers you moderate and consistent returns over the long term.

Nifty 500: It has the potential to deliver stronger returns during market rallies. This is mainly due to the involvement of the faster-growing companies.

Takeaway: Nifty 500 may outperform in the long run. But it is not good if you want stability during ups and downs. Also, it will demand a high level of patience. So, long-term investors can go for this.

3. Diversification and Exposure

Nifty 50: It focuses on the large-cap companies only. These are based on their market capitalization. But also, it focuses on proper representation of the major sectors like banking, IT, energy, and FMCG.

Nifty 500: It also follows the market capitalization strategy but across all companies. You would be able to find the companies from different sizes, sectors, and nature giving a better view.

Takeaway: For diversification and broad mix, go for the Nifty 500. And if you want short-term let only segment performers, Nifty 50 is better. 

4. Liquidity and Cost

Nifty 50: Stocks are highly liquid, easy to trade, and come with lower fund management costs.

Nifty 500: Includes some smaller companies with lower trading volumes, which may lead to higher transaction and tracking costs.

Takeaway: For convenience and cost-effectiveness, Nifty 50 remains the easier choice to invest in.

5. Investor Type

Nifty 50: This is for conservative or first-time investors. So, if you are an investor who is looking for long-term investment and stability, this should be your pick.

Nifty 500: This is suited for experienced investors. These must be the people who are ready to take higher risk and enjoy longer investment horizons.

Takeaway: If you are starting out, go for Nifty 50. Add Nifty 500 later on. But if you are looking to add short and long-term investment options that offer growth and stability, combine both.

In summary, Nifty 50 focuses on strength and consistency. But, the Nifty 500 provides depth and opportunity. So, the choice will be based on the needs like stability and growth combined with your risk profile as well. 

Read Also: ETF vs Index Fund: Key Differences You Must Know

Conclusion

When comparing Nifty 50 vs Nifty 500, there are so many things to consider. Both the indices help you to understand the economy well. Where one is narrow focused, the other is quite diversified. Both follow the simple idea of the market capitalization. This makes these two indicators a true sign of the economy’s performance.

If you are a cautious investor who values stability, Nifty 50 is the smarter choice. But if you want long-term capital appreciation and broader exposure, Nifty 500 is for you. 

But when you plan to invest in either, you must check and analyze well. Also, expert guidance is important. This is where you can connect and register on Pocketful. With proper details and support, you can start your investment journey with confidence.

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