Nifty Index vs Nifty 500 Index: A Complete Breakdown for Investors
Table of Contents
Two ways of looking at “the market”
When someone says that “the market is up,” they are usually talking to a broad NIFTY measure rather than a specific stock. The Nifty 50 is the most well-known picture in India, but the NIFTY 500 index offers a far wider view that includes hundreds of other companies. You may decide the type of diversity you truly want and read market moves more correctly by knowing how these two standards vary.
Nifty 50 – the concentrated core
The Nifty 50 tracks 50 large, liquid companies drawn from across the economy, from banking and IT to consumer goods and energy. Each stock’s weight is based on free-float market capitalisation, so bigger, widely traded firms move the index more than smaller ones. Because these names together account for well over half of NSE’s free-float market value, this particular NIFTY index is widely used for index funds, ETFs and derivatives, and it often sets the tone for intraday trading sentiment.
NIFTY 500 – the market in widescreen
While Nifty 50 focuses on the front rank, the NIFTY 500 index stretches the lens to 500 stocks chosen from roughly 1,300 NSE-listed companies. These constituents span 21 sectors and capture more than 96 percent of the exchange’s free-float market capitalisation, making the index about as close to “owning the whole market” as most investors can get in a single number. Mid-caps and selected small-caps sit alongside the giants here, so moves in this index tell you whether market strength is genuinely broad-based or confined to a few leaders.
Stock selection and reviews: who gets in, who falls out
Both indices follow clear rulebooks, but the entry bar is tighter for the Nifty 50. To join this flagship NIFTY index, a company must first be part of the Nifty 100 universe, trade every day with very low impact cost, and have a free-float value at least 1.5 times that of the smallest existing member. The NIFTY 500 index pulls from a larger pool, selecting stocks that rank within the top 800 by market cap and turnover and that have traded on at least 90 percent of sessions, with semi-annual reviews pruning illiquid or shrinking names.
Sector exposure and diversification in real portfolios
Because the Nifty 50 is dominated by a handful of big sectors—especially financials and IT—its returns can be heavily influenced by how those pockets behave in any given year. The NIFTY 500 index still gives meaningful weight to those same sectors, but it also includes more companies from manufacturing, healthcare, speciality chemicals, logistics and newer thematic areas that sit outside the top-tier fifty. For investors building long-term portfolios or using index funds, the choice often boils down to whether they prefer a tight, large-cap core or a broader basket that captures more of India’s mid-cap growth stories along with the blue chips.
Which index should you track as an investor?
There is no single “better” option; it depends on what you want the index to do for you. If your goal is to follow headline sentiment, trade index derivatives, or benchmark a portfolio concentrated in large caps, the Nifty 50 remains the most practical reference point. If you care more about how the entire listed universe is doing—and want your benchmark to move when mid-cap and smaller companies rally or struggle—the NIFTY 500 index offers a truer picture of the market’s overall health. Many Indian brokers, including platforms such as AngelOne, show both indices side by side, and comparing their trends over time is a simple habit that can make you a more informed equity investor.
