Nifty 500

What is the Nifty 500?

The Nifty 500 is a broad-based stock market index managed by NSE Indices Limited, representing the top 500 companies listed on the National Stock Exchange (NSE) of India. As India’s most comprehensive equity benchmark, the Nifty 500 covers approximately 96% of the free-float market capitalisation and nearly all trading volumes on the NSE. The index includes companies from across large-cap, mid-cap, and small-cap segments, providing a holistic view of the Indian equity market. Constituents span diverse sectors including finance, technology, energy, healthcare, consumer goods, and industrials, ensuring wide market representation and sectoral diversity.

The Nifty 500 is designed to reflect the overall health, performance, and trends of the Indian equity market. It is widely used by mutual funds, ETFs, and institutional investors as a benchmark for broad-market investment strategies and performance measurement. The index is reviewed and rebalanced semi-annually to ensure it remains relevant and accurately captures the evolving market landscape. As a result, investors and fund managers can use the Nifty 500 to gauge market sentiment, identify sectoral trends, and benchmark their portfolios against the entire listed market spectrum.

Nifty 500 stocks selection criteria

The selection of stocks for the Nifty 500 index is governed by transparent and systematic rules to ensure comprehensive market representation and investability. Companies are ranked by average full market capitalisation and average daily traded value. The top 500 eligible stocks form the index, provided they meet minimum listing history, liquidity, and trading frequency requirements. Only stocks listed on the NSE for at least six months are considered, ensuring sufficient trading and price discovery.

Stocks must also maintain a minimum impact cost and demonstrate consistent trading volumes over a specified period. Scrips under surveillance, those with significant corporate governance issues, or stocks facing regulatory restrictions are excluded. The index is reviewed and rebalanced semi-annually, in March and September, to incorporate market changes and ensure ongoing relevance. During each review, new stocks may be added if they rise in ranking, while existing stocks may be removed if they fall behind on market capitalisation or liquidity. This dynamic process ensures that the Nifty 500 always mirrors the Indian equity market’s current landscape, providing investors like you with reliable and up-to-date exposure to the country’s top companies.

How is the Nifty 500 index calculated?

The Nifty 500 is calculated using the free-float market capitalisation-weighted methodology. Only shares available for trading by the public—excluding promoter, government, and other locked-in holdings—are considered for index weighting. The index value is determined using the formula:

Index Value = (Current Free-Float Market Capitalisation / Base Market Capitalisation) x Base Index Value

The index is rebalanced semi-annually to ensure accuracy and continuity. Adjustments for corporate actions such as stock splits, rights issues, and mergers are incorporated in the calculation. This methodology ensures that the Nifty 500 reflects the true investable opportunity and performance of India’s listed equity market.

Factors affecting the Nifty 500 The performance of the Nifty 500 is influenced by a range of macroeconomic, sectoral, and company-specific factors. Key macroeconomic factors include GDP growth, interest rates, inflation, fiscal policies, and government reforms, all of which impact business performance and investor sentiment. Global events such as geopolitical developments, currency fluctuations, and commodity price movements also play a significant role, especially for companies with international exposure.

Sectoral performance within the index can sway its returns, given its diversified composition across various industries. Company-specific events such as earnings reports, management changes, mergers, and acquisitions can create volatility within the index. Additionally, changes in foreign institutional investment (FII) flows, domestic mutual fund activity, and regulatory changes can lead to significant index movements. The Nifty 500’s broad coverage means it is less susceptible to individual stock volatility, but it remains sensitive to overall market trends, sector rotations, and macroeconomic shifts. This makes it a dynamic and responsive benchmark for tracking the pulse of the Indian equity market.

How to invest in Nifty 500?

Investing in the Nifty 500 can be achieved through index mutual funds and exchange-traded funds (ETFs) that track the Nifty 500 index. These funds invest in all or most of the index’s constituents, providing broad diversification across large-cap, mid-cap, and small-cap stocks. You, as an investor, can access these funds via online platforms, brokers, or directly through asset management companies. ETFs offer the flexibility of intraday trading, while index funds can be purchased at the day’s net asset value (NAV).

For hands-on investors, it is possible to build a self-managed portfolio by purchasing individual Nifty 500 stocks, although this requires significant research, capital, and monitoring to maintain diversification. Systematic Investment Plans (SIPs) in Nifty 500 index funds are also a popular method, enabling regular investments and rupee cost averaging over time.