4 Reasons to Explore the Nifty Next 50 Index Fund

Many investors choose to invest in the Nifty 50 Index, as it represents the 50 largest and most well-established companies in India. However, they often overlook the Nifty Next 50 Index, which features the 50 companies ranked just below the Nifty 50 in terms of market capitalization. This index offers exposure to firms that are poised for growth and are often considered potential candidates to graduate into the Nifty 50. Investing in the Nifty Next 50 can provide an opportunity to capture the growth of emerging market leaders before they become part of the top tier.

The Nifty Next 50 Index Fund is designed to mirror the performance of the Nifty Next 50 Index. In this article, we will discuss the meaning of the Nifty Next 50 Index Fund, its benefits, its performance and how to invest in it.

Table of contents

• What is the Nifty Next 50 index fund?
• Benefits of investing in the Nifty Next 50 index fund
• How to invest in the Nifty Next 50 index fund

What is the Nifty Next 50 index fund?

To understand the Nifty Next 50 Index Fund, let's first understand what the Nifty Next 50 Index is. It is a stock market index created and managed by the National Stock Exchange (NSE). The stocks included in this index represent companies that are ranked 51 to 100 in terms of free-float market capitalisation and liquidity, just below the NIFTY 50 Index.

In other words, these companies have a reasonable prospect of graduating to the NIFTY 50 club, though this is not guaranteed. By extension, the Nifty Next 50 Index Fund is a type of index mutual fund that seeks to replicate the performance of the Nifty Next 50 Index.

Benefits of investing in the Nifty Next 50 index fund

Exposure to emerging large companies

While these companies have not yet attained Nifty 50 status, there is potential for them to eventually graduate to this benchmark index. Since these are mostly large cap companies, many investors tend to believe that they may eventually transform into the next market leaders.

Diversification across multiple sectors

Unlike sector-specific funds, the Nifty Next 50 Index covers companies from a wide range of industries. This sectoral diversification might reduce the risk associated with being overly dependent on a single sector.

Potential for long-term wealth creation

Since the fund invests in companies that, while still classified as large cap, are relatively smaller than Nifty 50 constituents, they may offer relatively better growth potential, particularly over a long-term horizon.

Cost-effective and transparent investment

Index funds, including the Nifty Next 50 Index Fund, usually come with a lower expense ratio compared to actively managed funds. Since they are passively managed, the fund manager does not spend resources researching and picking stocks. The objective is to mirror the performance of the underlying index (subject to tracking error), not outperform it.

How to invest in the Nifty Next 50 index fund

The most convenient way to invest in the NIFTY Next 50 Index is through an index fund or ETF that tracks it. Investors can consider investing a fixed amount at regular intervals, such as every month, in the form of an SIP. This helps average out the overall purchase cost and builds discipline in investing.

The process of investing is also simple. An investor needs to open an account with a registered mutual fund distributor, online platform or directly with the fund house. After completing the KYC requirements, investors can choose a Nifty Next 50 Index Fund from various options available.

Conclusion

The Nifty Next 50 Index Fund might be suitable for investors who want to diversify beyond the Nifty 50 and gain exposure to India’s emerging large cap companies. With its potential for long-term wealth creation, diversification across sectors and relatively low cost, it provides investors with an opportunity to participate in India’s growth story.

FAQs

What is the Nifty Next 50 Index Fund?

It is a passive index mutual fund that mirrors the performance of the Nifty Next 50 Index, which consists of 50 companies ranked just below the Nifty 50 by market capitalisation.

How does the Nifty Next 50 Index Fund differ from the Nifty 50 Index Fund?

The Nifty 50 consists of the top 50 companies by market capitalisation, while the Nifty Next 50 includes the next 50. The Nifty 50 is relatively more stable, while the Nifty Next 50 may carry higher growth potential along with higher volatility.

What are the benefits of investing in the Nifty Next 50 Index Fund?

Potential benefits include exposure to the next tier of large cap companies, diversification across sectors, relatively lower cost of investment and potential long-term wealth creation.

How can I invest in the Nifty Next 50 Index Fund?

You can invest through either a lumpsum investment or a Systematic Investment Plan (SIP) via a fund house, distributor, or online platform.

What are the risks associated with investing in the Nifty Next 50 Index Fund?

The primary risks include market volatility and sharper corrections compared to the Nifty 50. Since it tracks the next tier of large cap companies, it may be less stable than the top 50 firms.

What is the expense ratio of the Nifty Next 50 Index Fund?

Index funds typically have lower expense ratios compared to actively managed funds. The exact percentage varies across fund houses and should be verified in the fund's latest factsheet.

Can I invest in the Nifty Next 50 Index Fund through SIP?

Yes, most fund houses allow investors to invest through an SIP, where a fixed amount is invested at regular intervals.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.

The content herein has been prepared on the basis of publicly available information believed to be reliable. However, Bajaj Finserv Asset Management Ltd. does not guarantee the accuracy of such information, assure its completeness or warrant such information will not be changed. The tax information (if any) in this article is based on current laws and is subject to change. Please consult a tax professional or refer to the latest regulations for up-to-date information.

*Past performance may or may not be sustained in future.