Beyond the NIFTY 50: Is the NIFTY Next 50 a Better Long-Term Bet?

Often overshadowed by the NIFTY 50, the NIFTY Next 50 has quietly delivered impressive long-term returns. Abhishek Wani analyses how this index has outperformed the NIFTY 50 over the past 20 years and explains why investors should take a closer look at this high-potential segment — and how it can help build smarter, more diversified portfolios [EasyDNNnews:PaidContentStart]

A quiet shift is underway in Indian equity markets — not led by headline-grabbing blue-chips, but by future champions waiting in the wings. The NIFTY Next 50, a basket of companies ranked just below the top 50, is increasingly seen as fertile ground for wealth creation. 

Think of it as two trains: one established and widely followed (NIFTY 50), and another quieter yet faster over the long haul (NIFTY Next 50). While the former offers stability, the latter delivers dynamism—and in many historical periods, outperformance. 

With the rise of low-cost index funds and ETFs, accessing the NIFTY Next 50 has never been easier. Passive investing, as championed by John Bogle, isn’t just cost-effective—it’s a smart way to ride long-term compounding. As Bogle put it, ‘Don’t look for the needle in the haystack. Just buy the haystack.’ For Indian investors, the NIFTY Next 50 may well be the smartest part of that haystack. 

In an environment where active fund alpha is fading, the Next 50 is emerging as a strong satellite bet in core portfolios. It’s time to look beyond the familiar—because tomorrow’s leaders may already be riding the Next 50 train. 

What Is the NIFTY Next 50?
The NIFTY 50 comprises the largest and most liquid stocks listed on the NSE — the top 50 companies by free-float market capitalization. In contrast, the NIFTY Next 50 consists of the next 50 companies in line, making up the remainder of the NIFTY 100 universe. While not yet market leaders, these firms are typically high-growth candidates, often promoted into the NIFTY 50 over time. 

Why Choose NIFTY Next 50 Over NIFTY 50?
The NIFTY Next 50 has outperformed the NIFTY 50 over the long term, delivering a 20-year 5-year rolling return (annualised) of 13.26 per cent versus 10.91 per cent, a difference of 235 basis points. Leading funds tracking the Next 50 have recently posted stellar returns above 21 per cent. Many current NIFTY 50 giants, like Zomato and Trent, originated in the Next 50. 

Sector-wise, the NIFTY 50 is concentrated in Financials (37.6 per cent), IT (11.26 per cent), and Oil & Gas (10.24 per cent), sectors that are globally sensitive. In contrast, the NIFTY Next 50 is more diversified and domestically oriented, with significant exposure to Financials (20.7 per cent), FMCG, Capital Goods, and Power, as well as sectors like Realty and Chemicals, which are absent in the NIFTY 50. 

The Next 50 captures emerging consumption and infrastructure themes aligned with India’s growth story, offering valuable diversification and forward-looking sector exposure. With the rise of passive investing and low-cost funds (median expense ~0.77 per cent), the Next 50 has become popular among growth-focused investors seeking higher alpha. It complements the NIFTY 50 in core-satellite portfolios and supports tactical allocations during bull markets. 

Smart money is increasingly flowing into NIFTY Next 50 stocks, with both foreign institutional investors (FIIs) and domestic institutional investors (DIIs) selectively increasing their stakes. For instance, Divi’s Laboratories saw a sharp rise in FII ownership (+3.33 per cent), while Varun Beverages attracted strong DII interest (+5.03 per cent). Vedanta and InterGlobe Aviation also witnessed notable inflows from both FIIs and DIIs. This targeted accumulation highlights investor confidence in companies with niche leadership, robust fundamentals, and long-term growth visibility. 

Historically, the NIFTY Next 50 has traded at a valuation premium to the NIFTY 50, but it is currently available at a slight discount. As of June 2, 2025, the NIFTY Next 50’s P/E stands at 21.96, marginally below the NIFTY 50’s 22.29. This marks a notable shift from past trends—over the last 5 and 10 years, the Next 50 consistently commanded a higher P/E (averaging 25.5 and 27.5, respectively) compared to the NIFTY 50 (averaging 22.6 and 23.5). This relative discount presents a potential opportunity for investors seeking long-term growth at more reasonable valuations. 

The Data Doesn’t Lie: A 20-Year Historical Comparison of NIFTY 50 and NIFTY Next 50 Performance and Returns 

Here’s our analysis of NIFTY 50 and NIFTY Next 50 performance from June 2005 to June 2025, showing how NIFTY Next 50 has consistently outperformed NIFTY 50. 

Below is the relative performance of both indices starting from their levels in June 2005.

(As of June 3, 2025)

The relative performance analysis of NIFTY 50 and NIFTY Next 50 shows that over the past 20 years (June 2005 to June 2025), NIFTY 50 grew by 11.71 times, while NIFTY Next 50 grew by 15.1 times during the same period. 

For our analysis of NIFTY 50 and NIFTY Next 50, we computed 5-year rolling annualised returns over the past 20 years (June 2005 to June 2025). From this dataset, we derived the following returns. 

Volatility, Risk & Reward: A Game of Patience
A comparative analysis of 5-year rolling returns over the past 20 years shows that NIFTY Next 50 has significantly outperformed NIFTY 50 across key return metrics. The average return for NIFTY Next 50 stands at 13.26 per cent, beating NIFTY 50’s 10.91 per cent by 235 basis points. Similarly, the median return is 12.72 per cent versus 11.52 per cent, indicating better typical returns for the Next 50. 

In terms of extremes, NIFTY Next 50 shines with a higher maximum return of 27.32 per cent and a less negative minimum return of -1.10 per cent, compared to NIFTY 50’s -2.35 per cent. This suggests stronger upside potential and relatively better downside protection during weaker periods. 

However, this outperformance comes with higher risk. NIFTY Next 50’s standard deviation is 6.06 per cent, notably higher than NIFTY 50’s 4.53 per cent, reflecting greater volatility. Despite this, the higher average and median returns may justify the added risk for long-term investors. 

The coefficient of variation indicates that NIFTY 50 returns are more consistent (41.52 per cent vs. 45.69 per cent for Next 50), pointing to steadier performance cycles. Although the 25th and 75th percentile returns are equal for both indices, the interpretation favours NIFTY Next 50 due to its stronger historical returns above these thresholds. 

Overall, NIFTY Next 50 offers superior long-term performance but with higher variability. It suits investors seeking higher alpha with a longer investment horizon, while NIFTY 50 remains preferable for those prioritising low volatility and core portfolio stability. 

Over 20 years, NIFTY Next 50 has frequently delivered more compelling rolling return charts, a measure of consistency. Across most 5-year periods, it tends to outperform NIFTY 50. Yes, the Next 50 is more volatile with higher beta and standard deviation but this risk brings higher reward. For investors willing to endure occasional market swings, the long-term payoff is superior.

 

Between June 2005 and June 2025, the 5-year annualised rolling returns show that NIFTY Next 50 outperformed NIFTY 50 across higher return bands. While 54.3 per cent of NIFTY 50 returns clustered between 9–15 per cent, 27.49 per cent of NIFTY Next 50 returns fell in the 18–24 per cent range, and 2.04 per cent in the 24–27 per cent range—far exceeding NIFTY 50’s 5.1 per cent and 0.03 per cent respectively. Despite higher returns, NIFTY Next 50 had fewer negative return periods (0.59 per cent vs. 1.29 per cent), challenging the belief that greater returns always mean higher risk. 

In essence, over two decades, NIFTY Next 50 not only delivered higher returns, but did so with a greater frequency in higherperforming bands, establishing itself as a robust alphagenerating index for long-term investors willing to take marginally higher volatility for meaningful outperformance. 

Absolute Returns in Bear and Bull Markets
Notably, NIFTY Next 50 tends to outperform NIFTY 50 during bull phases, especially in 2023–24, 2020–21, and 2016–18, but falls more sharply during bear markets. 

This pattern highlights NIFTY Next 50’s higher beta—greater sensitivity and correlation with NIFTY 50—leading to larger swings in both directions. 

Volatility Trade-off : Risk and Opportunity
NIFTY Next 50 is more volatile, with deeper drawdowns during crises like COVID and IL&FS, but it often recovers faster. Many companies in this index are growth-stage firms undergoing earnings expansion and valuation rerating, positioning them as future NIFTY 50 candidates. For long-term investors, especially those using SIPs, volatility offers an advantage by allowing rupee-cost averaging and faster compounding on rebounds. 

While NIFTY Next 50 carries higher risk due to greater beta and less liquidity, its growth potential makes it attractive for investors with a 7–10 year horizon willing to endure short-term fluctuations. 

Mutual Fund Options to invest in NIFTY Next 50 

Statistical Evaluation for Investment Strategies: NIFTY 50 vs. NIFTY Next 50 Does the NIFTY Next 50 offer compelling strategic value for long-term portfolios? Let’s explore through statistical evaluation and the core-satellite model—a modern approach to constructing resilient yet growth-oriented portfolios. 

To gauge how the NIFTY Next 50 behaves relative to the more established NIFTY 50, we analyse their annualised 5-year rolling returns over the past 20 years. The correlation coefficient stands at 0.80, which reflects a strong positive relationship— both indices tend to move in the same direction most of the time. 

However, the extent of that movement differs. Calculating Beta, which measures volatility relative to the NIFTY 50, we arrive at 1.07 for the NIFTY Next 50. This means that if the NIFTY 50 rises or falls by 1 per cent, the NIFTY Next 50 is likely to move by 1.07 per cent—amplifying both gains and losses. For risk-aware investors, this added volatility must be factored into allocations. 

Another telling metric is R-squared (R²), derived by squaring the correlation (0.80² = 0.64). This indicates that 64 per cent of the NIFTY Next 50’s returns can be explained by movements in the NIFTY 50, with the remaining 36 per cent stemming from company-specific factors or idiosyncratic risks. 

Therefore, while it shares substantial common movement with NIFTY 50, adding NIFTY Next 50 to a NIFTY 50-based portfolio offers limited diversification benefits, especially in sectors like aviation, specialty finance, beverages, and defence manufacturing. 

Building a Core-Satellite Portfolio with NIFTY Next 50
The NIFTY 50 is ideal for conservative investors focused on stability and low volatility, featuring India’s top 50 companies with strong fundamentals. In contrast, the NIFTY Next 50 suits those with a higher risk appetite and a long-term view, offering growth potential through emerging sector leaders and future blue chips. For many, a blended strategy works best - building a Core-Satellite Portfolio using NIFTY 50 as Core and NIFTY Next 50 as Satellite, with emphasis on the low cost, higher return potential, and market behaviour of NIFTY Next 50. The Core-Satellite Model is a proven portfolio construction strategy in which core portion comprises low-cost, long-term holdings like index or blue-chip funds, ensuring consistency and risk control. 

The satellite component includes smaller, active bets to capture additional returns or manage market shifts more dynamically. 

Steps to Build a Smart Core-Satellite Portfolio Using NIFTY Next 50 as Satellite 

Step 1: Set Your Investment Goal and Risk Appetite
Begin with a clear objective of long-term wealth creation with a balance of stability and growth. This strategy suits moderate to high-risk investors with a time horizon of 5–10 years, allowing enough room for compounding and managing volatility.
Step 2: Allocate Core vs. Satellite Strategically
Use NIFTY 50 index funds as the core, offering market stability and lower volatility. The satellite, led by NIFTY Next 50, adds high-growth potential at low cost— cheaper than actively managed satellite options like thematic or Mid-Cap funds. A typical structure could be 70 per cent core (NIFTY 50, debt, gold) and 30 per cent satellite (NIFTY Next 50, optionally with other growth funds).
Step 3: Leverage NIFTY Next 50’s Market Behaviour
With a strong 0.80 correlation to NIFTY 50, NIFTY Next 50 complements core assets while offering higher upside in bull markets. It tends to outperform NIFTY 50 during rallies, though it may fall faster during market corrections—making it ideal for tactical allocation in satellite. Use valuation cues (like P/E below historical average) to increase allocation opportunistically.
Step 4: Choose SIP or Lump Sum Based on Market Cycle
Adopt SIPs for steady exposure, or invest lump sum during dips to benefit from recovery rallies especially effective with NIFTY Next 50’s historically higher bounce-back potential.
Step 5: Monitor and Rebalance Periodically
Review your portfolio every 6–12 months. If NIFTY Next 50 outperforms and its allocation exceeds the intended weight by 5–10 per cent, rebalance to maintain your risk-return profile in line with goals. 

This structure ensures cost efficiency, higher return potential, and better diversification without deviating from passive investing principles. 

Conclusion
The NIFTY Next 50 isn’t just a list of runner-ups—it’s a dynamic launchpad for India’s future blue-chip companies. With a proven track record of outperformance and alignment with India’s key growth drivers like consumption, manufacturing, and infrastructure, the index represents the next wave of market leadership. While it does carry more volatility than the NIFTY 50, history suggests that patient investors have been rewarded with stronger long-term returns. 

In an era where active fund alpha is increasingly elusive, low-cost passive investing offers a compelling alternative. Index funds and ETFs tracking the NIFTY Next 50 allow retail investors to access this powerful opportunity—offering diversification, sectoral balance, and disciplined exposure to companies scaling rapidly across emerging sectors. The Next 50 is not a substitute for the NIFTY 50—but a smart complement. 

A core-satellite approach makes sense: let the NIFTY 50 provide stability, while the Next 50 injects growth potential into your portfolio. As John Bogle advocated, owning the whole market is key—and in India, many future leaders are still quietly rising. 

Call to Action
If your SIPs and index allocations have so far been limited to the NIFTY 50, consider expanding your horizon. Evaluate index funds and ETFs tracking the NIFTY Next 50, compare costs, and diversify for the long term. Let compounding work not just through today’s giants, but through tomorrow’s champions. Because the most rewarding investments often come from companies just below the spotlight—on their way to the top. 

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