The Nifty 50 Index is a diversified equity index that comprises the 50 largest listed companies on the National Stock Exchange (NSE). These 50 companies are ranked on the basis of the free-float market capitalisation of their stocks as on 30th September 2022. This large-cap equity index features stocks from 13 different sectors and features India’s largest 50 companies.

Being the flagship index of NSE, Nifty 50 Index is among the most commonly followed indices in India and its movement is often considered as an indicator of the overall performance of India’s stock market. However, one must keep in mind that this is not an equal weight index i.e. different stocks have different weights i.e. all the stocks featured on this index have an equal impact in the upward or downward movement of the index. So, an index fund replicating this large-cap diversified index will also have to replicate the individual weight of each stock as featured on the index.

As the name suggests, Nifty 50 stocks list features 50 individual stocks. The below table lists the top 10 stocks featured on the Nifty 50 based on their weights as of July 2023:

As you might have noticed from the above list, the 10 largest companies featured in this Nifty large cap index belong to a variety of sectors. The below table illustrates the exposure of the index to various sectors and their individual weights as of 30th June 2023:

The construction of the index is such that investors can consider the Nifty 50 Index as a hypothetical portfolio featuring 50 large cap stocks. Based on this assumption and the fact the value of stocks features on the index changes on a daily basis, it is possible to determine the returns of the Nifty 50 Index over different time periods as shown below:

Now that you have a better understanding of what the Nifty 50 is, let’s consider the various ways you can invest in this diversified index. In broad terms, there are 3 ways to do this –through a Nifty 50 index fund, through a Nifty 50 ETF or direct investment in equity stocks comprising the index. Here’s what you need to consider when choosing any of the options: