MARKETS2 MIN READ

Understanding NIFTY 50 & NIFTY Next 50

The NIFTY 50 is a diversified 50 stock index accounting for 12 sectors of the economy & the flagship index on the National Stock Exchange of India Ltd. (NSE).

Nifty 50 comprises of some of the largest, most liquid bluechip stocks in the stock market. The selection to this index is subject to various criteria. One of the key criterion is the free float market capitalisation or the number of shares publicly available to buy and sell (and not locked in with the promoters, etc.).

NIFTY 50 is owned and managed by India Index Services and Products Ltd. (IISL). IISL is India’s specialized company focused upon the index as a core product.

The NIFTY 50 Index represents about 63% of the total market capitalization of all the stocks listed on the NSE as on March 31, 2017.

Another commonly tracked index is the Nifty 100 index with the same selection criteria as the Nifty 50 but applied to the top 100 companies by free float market capitalisation.

Now, what if you take away the Nifty 50 from Nifty 100?

You are left with a group of 50 stocks and an index called the Nifty Next 50, also known as the “Junior Nifty”. Think of it as group of companies that are not the largest but are large enough, they are not there yet but getting there. Some or many of these will go to become a part of the Nifty 50 index at some point in time.

The Nifty Next Fifty index has to its credit the record of beating the Nifty since inception. It has clocked impressive growth in the recent few years during the bull-run with relatively low volatility compared to the other midcap & smallcap indices. It is slowly but surely gaining popularity amongst passive investors as an index to consider investing in.

The NIFTY Next 50 Index represents about 12% of the total market capitalization of all the stocks listed on the NSE as on March 31, 2017.

Interestingly, Nifty Next 50 as a portfolio structure is quite different from Nifty 50.

Here are a few facts for you to understand this better.

Following is the sectoral composition of NIFTY 50 & NIFTY Next 50

Nifty Nov, 2018

Sector Representation

Sector Weight(%)
FINANCIAL SERVICES 36.45
IT 14.78
ENERGY 14.52
CONSUMER GOODS 10.79
AUTOMOBILE 7.09
METALS 4.47
CONSTRUCTION 3.87
PHARMA 3.06
CEMENT & CEMENT PRODUCTS 1.68
TELECOM 1.49
MEDIA & ENTERTAINMENT 0.61
SERVICES 0.61
FERTILISERS & PESTICIDES 0.60

Fundamentals

P/E P/B Dividend Yield
25.0 3.29 1.27

Top constituents by weightage

Company’s Name Weight(%
HDFC Bank Ltd. 9.91
Reliance Industries Ltd. 8.78
Housing Development Finance Corporation 6.95
Infosys Ltd. 6.30
I T C Ltd. 5.80
ICICI Bank Ltd. 5.52
Tata Consultancy Services Ltd 5.02
Larsen & Toubro Ltd. 3.87
Kotak Mahindra Bank Ltd. 3.61
Hindustan Unilever Ltd. 2.80

NIFTY Next 50 Nov, 2018

Sector Representation

Sector Weight(%)
CONSUMER GOODS 27.34
FINANCIAL SERVICES 17.26
PHARMA 13.71
AUTOMOBILE 10.85
CEMENT & CEMENT PRODUCTS 6.92
INDUSTRIAL MANUFACTURING 5.16
ENERGY 4.47
METALS 3.69
SERVICES 3.60
CHEMICALS 2.35
IT 1.30
CONSTRUCTION 1.18
TELECOM 1.14
MEDIA & ENTERTAINMENT 1.03

Fundamentals

P/E P/B Dividend Yield
38.23 3.77 1.04

Top constituents by weightage

Company’s Name Weight(%
Britannia Industries Ltd. 5.34
Godrej Consumer Products Ltd. 4.40
Aurobindo Pharma Ltd. 3.58
Dabur India Ltd. 3.49
Lupin Ltd. 3.41
Motherson Sumi Systems Ltd. 3.15
Piramal Enterprises Ltd. 3.03
Bosch Ltd. 2.90
United Spirits Ltd. 2.76
Shree Cement Ltd. 2.73

Nifty 50 Versus Nifty Next 50 Index Nav

Nifty 50 Versus Nifty Next 50 Absolute returns (%)


Author

Bhuvenesh Balaji


RA,Prosperity Wealth Management