The Nifty Next 50 index includes the 50 companies that are ranked 51 to 100 in terms of free-float market capitalisation after the Nifty 50 constituents. Commonly known as the “Junior Nifty”, this index functions as an incubator for aspiring Nifty 50 candidates that emerge from the Nifty Midcap 150. Simultaneously, it also acts as a catchment for underperforming stocks that have been removed from the Nifty 50 line-up.
Higher volatility
A look at 10-year rolling returns over the past 20 years shows that the Nifty Next 50 Total Return Index (TRI) delivered an annualised return of 15 per cent, outperforming the Nifty 50 TRI’s 12 per cent and slightly below the Nifty Midcap 150 TRI’s 16 per cent.
However, this performance has been accompanied by higher risk, with the Nifty Next 50 recording an annualised standard deviation of 23 per cent, compared to 14 per cent for the Nifty 50 and 25 per cent for the Midcap 150. Despite its large-cap nature, the Next 50’s risk profile aligns more closely with mid-caps. One major contributor to this volatility is the frequent rebalancing of index constituents. On average, the Nifty Next 50 has seen 11 changes per year over the past five years, far more than the Nifty 50’s average of two and the 29 changes in the Nifty Midcap 150’s much larger universe. Stocks move into the index either from below (as mid-caps grow) or from above (as fallen large-caps are downgraded), both scenarios often triggering volatility as institutions reposition their holdings.
Another factor is the high promoter ownership and lower free float among Nifty Next 50 constituents. As of March 2025, the average promoter holding in these stocks was 62 per cent, significantly higher than the 42 per cent in the Nifty 50 and 52 per cent in the Nifty Midcap 150. The lower float limits liquidity and market depth, magnifying price movements.
Moreover, the index is heavily weighted toward emerging sectors and companies undergoing significant transition whether from shifts in business models, or disruptive changes within their industries. These dynamics increase uncertainty in earnings and valuation, further contributing to volatility. The inclusion of new-age companies such as Zomato, FSN E-Commerce Ventures, and One 97 Communications, which have seen a roller coaster ride illustrates the impact such firms can have on the index’s overall returns.
Performance in various market cycles
Over the last 10 years, the Nifty Next 50 has shown a mixed performance compared to its close counterparts across different equity market cycles. During the 2015-16 bear market, it contained losses better than both the Nifty 50 and Nifty Midcap 150, largely due to its lower exposure to heavily affected sectors like PSU banks, real estate, and metals that drove the correction amid global and domestic pressures.
The period from 2017 to 2020 proved challenging for the index as it suffered from significant exposure to struggling sectors. Financial stocks, particularly NBFCs, faced difficulties following the IL&FS default-triggered liquidity crisis. Simultaneously, pharmaceutical companies including Aurobindo Pharma, Zydus Lifesciences, and Lupin encountered US regulatory hurdles and pricing challenges. The Covid-19 pandemic further exacerbated these issues, especially impacting aviation and hospitality sectors.
During the 2023-24 market rally, which was powered by strong domestic economic growth outperforming global economies and renewed foreign institutional investment amid the Nifty Next 50 excelled with a 64 per cent return. This performance surpassed both the Nifty 50’s 36 per cent and the Nifty Midcap 150’s 61 per cent gains, boosted by standout performers like Dixon Technologies (India), Prestige Estates Projects, and Torrent Power.
The most recent correction, from September 2024 to March 2025, saw the Nifty Next 50 fall 24 per cent, more than the 15 per cent and 20 per cent drops in the Nifty 50 and Nifty Midcap 150, respectively. This period coincided with rising US tariffs, which disrupted global trade flows and disproportionately hurt mid-sized companies typical of the Next 50. Foreign portfolio investors pulled out capital from these high-beta names in favour of safer large-cap bets. However, between March and May 2025, the index rebounded by 13 per cent, slightly ahead of the Nifty 50’s 12 per cent gain, though still trailing the Midcap 150’s 16 per cent surge.
Overall, there seems to be no compelling case for investing in the Nifty Next 50. While the performance in the latest rally has been strong, history suggests that the index tends to lag Nifty Midcap 150 in rolling returns and falls more than the Nifty 50 during bear phases.
Published on May 17, 2025
