Indian Stock Market Indices Explained: From Nifty 50 to Nifty Next 50, Midcap 150 & Beyond
Team Sahi
Indian investors in 2026 have more index options than ever — and more confusion than ever. Should you invest in Nifty 50 or Nifty Next 50? What even is Nifty Midcap 150? And why does everyone talk about "the index" as if there's only one?
This guide breaks down every major Indian stock market index — what it tracks, how it's constructed, who should invest in it, and what historical returns look like. By the end, you'll have a clear framework for which indices belong in your portfolio.
What Is a Stock Market Index?
An index is a basket of stocks that represents a segment of the market. When you hear "Nifty is up 0.5% today," it means the weighted average price of the 50 stocks in the Nifty 50 index moved up by that amount. Indices serve two purposes: they act as market thermometers (telling you how the market is doing), and they serve as benchmarks for funds and portfolios.
In India, NSE manages the Nifty family of indices. BSE manages the Sensex and BSE indices. The Nifty indices are more widely used for investing purposes.
Nifty 50 — India's Premier Index
The Nifty 50 is the flagship index of the National Stock Exchange, comprising 50 of India's largest companies by free-float market capitalisation. It covers approximately 65% of NSE's total market capitalisation. The index is rebalanced semi-annually, and companies must meet strict liquidity and financial health criteria to be included.
As of early 2026, the Nifty 50 is dominated by financial services, IT, oil and gas, and consumer goods sectors. Historical long-term CAGR of the Nifty 50 has been approximately 12-13%, making it an excellent benchmark for large-cap equity investing.
Nifty Next 50 — The Bench of Blue Chips
The Nifty Next 50 comprises the 51st to 100th largest companies by free-float market cap on NSE. It's essentially the waiting room for the Nifty 50 — companies in the Next 50 often graduate to the Nifty 50 as they grow. This makes it an interesting growth bet.
Historically, Nifty Next 50 has delivered higher returns than Nifty 50 over long periods, but with higher volatility. Over the past 10 years through 2025, Nifty Next 50 delivered approximately 14-15% CAGR vs. ~12% for Nifty 50. The trade-off is that drawdowns can be deeper.
Nifty Midcap 150 — Mid-Sized Growth Companies
The Nifty Midcap 150 includes the 101st to 250th largest companies by full market capitalisation on NSE. Midcap companies are in the growth phase — larger than small caps but not yet blue chips. They offer higher growth potential than large caps, and over long periods (10+ years), Indian midcap indices have outperformed large caps significantly.
However, midcap stocks can fall 40-60% in bear markets. Investing in this index requires a minimum 7-10 year horizon and the stomach for volatility.
Nifty Smallcap 250 & Related Indices
The Nifty Smallcap 250 covers companies ranked 251st to 500th by market cap. Small caps carry the highest risk-reward profile among equity indices. They can be multi-baggers in bull markets but can also lose 70-80% of value during corrections. The Nifty Smallcap 100 is a popular index fund option offering focused exposure to the top 100 small cap stocks.
Nifty 500 — Broadest Market Representation
The Nifty 500 captures approximately 94% of NSE's total market capitalisation by including the top 500 companies across large, mid, and small cap segments. For investors who want a single, truly diversified index fund, Nifty 500 index funds are worth considering.
Sectoral & Thematic Indices
Fin Nifty (Nifty Financial Services)
Fin Nifty tracks the top financial services companies — banks, NBFCs, insurance companies, and housing finance companies. It's one of the most actively traded derivative contracts on NSE. Given that India's financial sector often moves differently from the broader market, Fin Nifty is valuable for sector-specific exposure or hedging.
Bank Nifty
Bank Nifty includes the 12 most liquid banking stocks on NSE. It's the most traded options contract in India and globally by open interest. Investors and traders watch Bank Nifty closely as banks are bellwethers for India's economic health.
Nifty IT, Pharma, FMCG, Auto
NSE maintains sectoral indices for IT, pharma, FMCG, auto, energy, and other sectors. These are useful for sector rotation strategies and thematic ETF investing.
How Nifty Indices Are Constructed
All Nifty indices use free-float market capitalisation weighting — meaning only shares available for public trading (not held by promoters) are counted in the weight calculation. This is important: a company like TCS might have a large total market cap, but because promoters hold a large portion, its index weight is based only on freely traded shares.
| Index | No. of Stocks | Market Cap Segment | 10-Yr CAGR (Approx.) | Best For |
|---|---|---|---|---|
| Nifty 50 | 50 | Large Cap | ~12% | Core equity holding |
| Nifty Next 50 | 50 | Large-Mid Cap | ~14-15% | Growth allocation |
| Nifty Midcap 150 | 150 | Mid Cap | ~15-16% | Long-term growth, 10+ yr horizon |
| Nifty Smallcap 250 | 250 | Small Cap | ~14-18% | Aggressive growth, high risk tolerance |
| Nifty 500 | 500 | Broad Market | ~13% | Single-fund diversification |
| Fin Nifty | 20 | Financial Services | ~14% | Sector exposure / derivatives |
| Bank Nifty | 12 | Banking | ~13% | Banking exposure / active trading |
How to Invest in Indian Indices
You don't buy an index directly. You invest in it through index funds or ETFs that track it. For example:
- Nifty 50 → UTI Nifty 50 Index Fund, HDFC Index Fund — Nifty 50, or Nippon India ETF Nifty BeES
- Nifty Next 50 → UTI Nifty Next 50 Index Fund, ICICI Prudential Nifty Next 50 Index Fund
- Nifty Midcap 150 → Motilal Oswal Nifty Midcap 150 Index Fund
When choosing between an index fund and ETF for the same index, consider: ETFs have lower expense ratios but require a demat account and may have tracking error due to market prices vs. NAV. Index funds can be invested through SIPs without a demat account.