NIFTY NEXT 50 INDEX

If you are a passive investor based in India then you must know about the Nifty Next 50 indices or index. But how is it different from Nifty 50, how to invest in it, how does it work, what is the structure are the questions that arise and we are going to discuss the same in this article. So let’s get started.

WHAT IS NIFTY NEXT FIFTY?

The Nifty Next Fifty Index represents 50 companies from nifty 100 after excluding the first nifty 50 entities. Nifty next 50 was earlier referred to as Nifty Junior index. We can in a way say that Nifty Fifty + Nifty Next 50 = Nifty 100.

Or we can represent the relation between Nifty fifty and nifty next 50 as

The top fifty companies make the Nifty Fifty.
The next 51 to 100 companies constitute the Nifty Next 50 Index.

It must also be mentioned that as per SEBI’s new categorization of stocks into Small, Mid and Large capitalization stocks, the top 100 stocks as per market cap are identified as large cap stocks. So these 100 large cap stocks in themselves constitute the Nifty 50 and Nifty Next 50.

Depending on how a share performs in both the indexes and what the management committee decides periodically, shares keep moving from Nifty to the Next 50 indices and vice versa. Stocks doing well in Next 50 graduate to Nifty 50 while the ones in Nifty that are not doing so well are kicked back to Next 50 index.

So in curx, the answer to the difference is that the Nifty Fifty list consists of the 50 largest companies while the next 50 index inculcates the next 50 big companies.

HOW TO INVEST IN NIFTY NEXT 50 INDEX?

Investors have 2 options to do so. They can invest through a Nifty Next 50 index fund or an Exchange Traded Fund (ETF). There are various index funds in India. The ones that are based on Nifty Next 50 are as follows:

So if you are looking for which is the best fund among the mentioned ones, then you can get in touch with our experts at ZFund and we will help you in your journey towards financial independence.

MERITS OF NIFTY NEXT 50

If there is a mid cap share which is performing good and is not present in the Nifty 100, it gets promoted to large cap and gets added in the Nifty next 50.
Nifty next 50 does not have a concentrated allocation to a specific stock. So this is very huge merit as Nifty has very concentrated allocation, For instance, HDFC Ltd has around 9% allocation which is not the case in Nifty Next 50.

SECTOR WISE ALLOCATION OF NIFTY NEXT 50

Sector	Allocation
Consumer Goods	28.53%
Financial Services	18.25%
Pharma	12.51%
Automobile	9.93%
Cement and Cement Products	7.50%
Industrial Manufacturing	5.14%
Energy	4.18%
Services	3.92%
Metals	3.20%
Others	6.85%

TOP 10 STOCKS

Stocks	Weight (%)
Britannia industries Ltd	5.47
Godrej Consumer Products Ltd	4.57
Dabur India Ltd	3.63
Shree Cement Ltd	3.13
Piramal Enterprises Ltd	3.12
Aurobindo Pharma Ltd	3.07
Lupin Ltd	3.02
Motherson Sumi Systems Ltd	2.98
Marico Ltd	2.87
United Spirits Ltd	2.82
Total Weight	35.4

SHOULD YOU INVEST IN NIFTY NEXT 50?

Every fund has a different risk profile and return and therefore is suitable for different types of investors. So if it is about simply investing in mega or large caps, the picking Nifty might be a better option but if you want to invest in both mega/large and large/mid cap entities, then investing in both Nifty and Next 50 is the way forward. The ratio between the two will totally depend on where you would want to focus more. We have witnessed that the Nifty 100 index fund is not exactly equal to the sum of the next 50 and nifty. But even that can be a good option for getting large cap exposure with a small part of exploring mid caps.

But if you want to pick funds for your mutual fund portfolio, make sure you consider and include funds in other categories like multi cap, small cap and flexi cap etc, so that your index funds can complement your existing funds.

For a more detailed discussion on mutual fund portfolios and how to design your own, you can get in touch with our experts at ZFunds.