NIFTY 500 – Full Explanation

 

1. What is Nifty 500?

Nifty 500 is an index that represents the top 500 listed companies in India, selected based on free-float market capitalization.

It is one of the broadest indices in India and captures almost the entire stock market in a single index.

2. Why Do Indices Like Nifty 500 Exist?

Indices are used for multiple purposes:

✔ Benchmarking mutual fund portfolios

✔ Launching index funds

✔ Creating ETFs

✔ Structured financial products

✔ Tracking market sentiment

Nifty 500 gives a broad, diversified, and holistic view of India’s equity market.

3. Nifty 500 Index Methodology

ParameterDetails
MethodologyFree-float Market Capitalization
Base Date1 January 1995
Base Value1,000
Current Value~17,000 (as per October 2022 fact sheet)

This means the index has grown about 17 times since 1995.

4. Sectors Covered in Nifty 500

The index includes 21 sectors, making it one of the most diversified indices in India.

It truly represents:

“Bade Bharat ka Bada Index”

(the big index of a broad Indian market)

5. What Does Nifty 500 Consist Of?

It contains:

  • Large-cap companies
  • Mid-cap companies
  • Small-cap companies

    Hence, it covers 93% of the total market capitalization of all NSE-listed companies.

    This makes it far more comprehensive than Nifty50.

    6. Top 10 Constituents of Nifty 500

    Some of the largest companies in Nifty500 include:

    • HDFC Bank
    • Reliance Industries
    • ICICI Bank
    • Infosys
    • ITC
    • L&T
    • TCS
    • Axis Bank
    • Kotak Mahindra Bank
    • Bharti Airtel

      Key Point:

      No single company has a weightage above 10%, making the index balanced and not dependent on just one or two companies.

      7. How Are Companies Selected?

      Nifty 500 is updated based on:

      • Market capitalization
      • Liquidity criteria
      • Eligibility rules

        Rebalancing happens twice a year:

        • 31 January
        • 31 July

          Companies may enter or exit the index depending on ranks.

          8. Nifty 500 vs Nifty 50 – Performance Comparison

          Across all time horizons shown:

          ✔ 1-year returns – Nifty 500 performed better

          ✔ 3-year returns – Nifty 500 performed better

          ✔ 5-year returns – Nifty 500 performed better

          This happens because:

          • Nifty500 captures small and mid-caps also
          • Broader exposure brings higher growth potential

            But:
            Past performance is NOT a guarantee of future returns.

            9. Importance of Free-Float Market Cap

            Free-float market capitalization considers only publicly tradable shares, excluding promoter holdings.

            This makes the index more:

            • Accurate
            • Transparent
            • Representative of real market movement

              (There is a separate blog on this concept on her website.)

              Final Takeaways

              ✔ Nifty 500 is the most diversified broad-market index in India

              ✔ Covers 93% of total listed market cap

              ✔ Includes all sectors and all categories (large, mid, small)

              ✔ Less concentrated risk

              ✔ Historically outperformed Nifty50 in several time periods

              ✔ Rebalanced twice a year for accuracy

              It is ideal for investors seeking:

              • Broad market exposure
              • Long-term stability
              • Diversification across sectors and market caps


                Krishicode

                Posted by Krishicode

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