The NIFTY 500 is a broad-based stock market index that tracks the performance of the top 500 companies listed on the National Stock Exchange of India (NSE), selected based on full market capitalization from the eligible universe of stocks.[1] It was established with a base date of January 1, 1995, and a base value of 1,000, providing a comprehensive benchmark for the Indian equity market's overall trends.[2]The index employs a free float market capitalization-weighted methodology, where the weight of each constituent reflects its free float market value relative to the total free float market value of all constituents during the base period.[2] As of September 30, 2025, the NIFTY 500 represents approximately 91.76% of the free float market capitalization of NSE-listed stocks, with its constituents accounting for about 79.55% of the total traded value on the exchange over the preceding six months.[1] Eligible securities exclude convertible stocks, bonds, warrants, rights, and preferred stock, ensuring focus on standard equity shares.[2]Rebalanced semi-annually, effective on the last working day of March and September, the index maintains liquidity and market representation by incorporating average daily turnover criteria alongside market capitalization.[2] Sectorally, it is dominated by financial services (31.11% weight as of October 31, 2025), followed by information technology, consumer goods, and energy, reflecting the diverse composition of India's corporate landscape.[2] Top holdings include major firms like HDFC Bank Ltd. (7.55% weight) and Reliance Industries Ltd. (5.04% weight), underscoring its emphasis on large-cap leaders while extending to mid- and small-cap entities.[2]Widely utilized for investment purposes, the NIFTY 500 serves as a key tool for benchmarking mutual fund and portfolio performance, as well as the basis for index funds, exchange-traded funds (ETFs), and structured products offered by issuers such as Motilal Oswal Mutual Fund, Axis Mutual Fund, ICICI Prudential Mutual Fund, and SBI Mutual Fund.[2] Its broad coverage and real-time calculation make it an essential indicator of economic health and investor sentiment in India.[1]
Overview
Definition and Purpose
The NIFTY 500 is a broad-based equity index comprising the top 500 companies listed on the National Stock Exchange (NSE) of India, selected based on full market capitalization from the eligible universe.[3] It is managed by NSE Indices Limited, a subsidiary of the NSE focused on developing and maintaining benchmark indices.[4] The index provides a comprehensive snapshot of the Indian equity market by including companies across various market capitalizations, from large-cap to mid-cap and small-cap segments.[1]The primary purpose of the NIFTY 500 is to serve as a benchmark for measuring the overall performance of the Indianstock market, offering investors a diversified representation across multiple sectors such as financial services, information technology, consumer goods, and energy.[2] It aims to reflect the broader market dynamics beyond just the largest companies, capturing the influence of mid- and small-cap stocks on economic growth.[3] As of September 30, 2025, the index covers approximately 91.76% of the free float market capitalization of stocks listed on the NSE and 79.55% of the total traded value over the preceding six months.[3] The index is calculated using a free float market capitalization weighting methodology, which adjusts for the portion of shares available for public trading.[2]The NIFTY 500 plays a key role in facilitating passive investment strategies through various financial products, including index funds, exchange-traded funds (ETFs), and derivatives contracts that track its performance.[2] These instruments allow investors to gain broad exposure to the Indian equity market without the need for active stock selection, promoting cost-effective portfolio diversification.[1] For instance, several mutual funds from issuers like Motilal Oswal and AxisMutual Fund are benchmarked against the NIFTY 500 to evaluate their returns relative to the market.[1]
Significance in Indian Markets
The NIFTY 500 index serves as a comprehensive representation of India's economic diversity by encompassing the top 500 companies across 21 sectors, including prominent areas such as financial services (31.11% weight), information technology (7.81%), consumer goods, and energy, thereby capturing approximately 91.76% of the free float market capitalization on the NSE as of September 30, 2025.[1][5] This broad sectoral coverage enables the index to reflect the overall health of the Indian economy, highlighting growth in diverse industries from manufacturing to services and providing a holistic snapshot of corporate performance beyond large-cap dominance.[6]As a key benchmark, the NIFTY 500 is widely utilized by mutual funds, portfolio managers, and institutional investors to assess broad market exposure and evaluate investment strategies, with over 110 active mutual funds benchmarking against it managing significant assets under management and several passive funds.[6] This role underscores its importance in facilitating diversified equity investments and serving as a reliable gauge for market-wide trends in India.The index has spurred financial innovation through the development of NIFTY 500-based exchange-traded funds (ETFs) and index funds, such as the Motilal Oswal Nifty 500 Index Fund launched in September 2019 and its ETF variant in 2023, which have democratized access to broad-market passive investing for retail and institutional participants.[7] Since its inception in January 1995, the index has delivered a historical compound annual growth rate (CAGR) of 12.39% for the Total Return index through September 30, 2025, reinforcing its appeal for long-term wealth creation.[8]Movements in the NIFTY 500 significantly influence market sentiment by signaling broader trends in corporate earnings and economic growth, offering policymakers and investors insights into the resilience and direction of India's equity ecosystem.[6] Its stability and comprehensive coverage help shape proactive economic policies, as evidenced by its role in tracking national market capitalization milestones that inform regulatory and fiscal decisions.[9]
History
Inception and Base Period
The NIFTY 500 index was developed by the National Stock Exchange of India (NSE), as an extension of the NIFTY family of indices to offer a broader representation of the Indian equity market beyond the large-cap focused NIFTY 50.[6] This development aimed to create a comprehensive benchmark that incorporates a wider spectrum of market segments, including those not adequately captured by narrower indices.[6]The index is calculated with a base date of January 1, 1995, and a base value of 1,000, selected to enable back-testing and ensure historical continuity in performance tracking from a period that reflects early post-liberalization market dynamics in India.[2][6] This foundational setup allows for consistent evaluation of market evolution over time, using free-float market capitalization as the weighting mechanism (effective from June 26, 2009).[2][10]The rationale for constructing the NIFTY 500 as a 500-stock index centered on including mid-cap and small-cap companies, which were underrepresented in earlier benchmarks like the NIFTY 50, thereby providing a more holistic proxy for the overall Indian stock market.[6] By selecting the top 500 companies based on free-float market capitalization, the index was designed to encompass diverse segments and enhance its utility as a market-wide reference.[6]Initially, the NIFTY 500 found adoption in academic research, financial analytics, and portfolio benchmarking, serving as a tool for studying broad market trends before its integration into investment products such as mutual funds and exchange-traded funds.[6] This early focus on analytical applications helped establish its credibility as a reliable gauge of market breadth.[6]
Evolution and Milestones
The NIFTY 500 index was launched on January 1, 1995, with a base value of 1,000, aligning with the early development of the National Stock Exchange's (NSE) electronic trading infrastructure, which had commenced operations in 1994. This setup facilitated the index's role in capturing the performance of the top 500 companies by full market capitalization, covering large-cap, mid-cap, and small-cap segments.[11][12] By the early 2000s, the index had established itself as a comprehensive benchmark, reflecting the growing depth of India's equity markets amid economic liberalization.A significant evolution came with the switch to free-float market capitalization weighting on June 26, 2009, which better reflected investable opportunities by adjusting for promoter holdings and other non-publicly available shares.[10] Another key development was the introduction of the NIFTY 500 Total Return (TR) variant, designed to incorporate dividend reinvestments for a more accurate representation of long-term investor returns, delivering a compound annual growth rate (CAGR) of 12.39% since inception (as of September 2025).[11] This variant addressed limitations in price-return indices by accounting for income components, enhancing its utility for benchmarking passive investment products and long-term portfolio analysis. The index underwent semi-annual rebalancing to maintain relevance, with methodology refinements emphasizing liquidity through impact cost criteria to ensure tradability of constituents.[12]Key milestones include the index's resilience during global disruptions, such as the 2008 financial crisis, where heightened focus on liquidity filters in eligibility criteria helped stabilize constituent selection amid market volatility and reduced trading volumes.[11] Post-crisis, the NIFTY 500 recovered steadily, underscoring its broad-based composition as a buffer against sector-specific shocks. Similarly, following the 2020 COVID-19 pandemic-induced downturn, the index rebounded robustly, achieving new highs by incorporating recovery-driven sectors while upholding liquidity standards to support investor confidence during economic revival.[11]In terms of market adoption, a notable milestone occurred in 2019 with the launch of the first major exchange-traded fund (ETF) and index fund tracking the NIFTY 500, such as the Motilal Oswal Nifty 500 Index Fund, enabling retail and institutional investors to access its diversified exposure more easily.[13] By 2025, five passive funds benchmarking the index managed approximately ₹3,700 crores in assets under management (as of August 31, 2025), highlighting its growing prominence.[11] Over the period from 1995 to 2024, the NIFTY 500 outperformed the NIFTY 100 in 11 of 20 calendar years, demonstrating its ability to capture broader market opportunities beyond large-cap dominance.[11]
Composition
Selection Criteria
The NIFTY 500 index selects its constituents from the universe of all equity shares listed and traded on the National Stock Exchange (NSE) of India. Eligible securities must be domiciled in India and exclude non-equity instruments such as convertible stocks, bonds, warrants, rights, and preferred stocks with guaranteed fixed returns.[2] Additionally, stocks under suspension or those failing liquidity thresholds—such as an average impact cost exceeding 1% or trading on fewer than 90% of days over the previous six months—are ineligible.[12] Newly listed securities require a minimum listing history of one month as of the cutoff date to enter the eligible universe.[2]To form the eligible universe, companies are first ranked within the top 800 based on their combined average daily turnover and full market capitalization over the preceding six months.[2] From this pool, the top 500 companies are selected primarily by full market capitalization, with average daily turnover serving as a tie-breaker for stocks with equivalent values.[1] Securities must also meet a threshold where their full market capitalization is at least 1.5 times that of the smallest current constituent to ensure inclusion among the top ranks.[2] There are no sector-specific caps or preferences in the selection process, allowing for broad representation across industries.[12]Exclusion rules further refine the index by barring securities ranked below the top 800 in full market capitalization or average turnover, as well as those not meeting the minimum trading frequency or liquidity standards.[2] Companies must have at least six months of trading history to satisfy the 90% trading frequency requirement, though the formal minimum listing period is one month.[12] Stocks in the futures and options (F&O) segment are compulsorily included if they qualify, up to a limit that supports overall liquidity.[12]The selection process is managed by NSE Indices Limited to maintain objectivity and transparency, with criteria publicly documented and applied semi-annually using six-month average data.[2] This methodology ensures the index captures the largest and most liquid companies, representing approximately 92% of the free float market capitalization on the NSE as of recent reviews, though free float adjustments are applied in the weighting phase rather than selection.[1]
Current Constituents and Sector Allocation
The NIFTY 500 index comprises 500 companies selected from the eligible universe of stocks listed on the National Stock Exchange (NSE) of India.[2] As of October 31, 2025, these constituents represent approximately 91.8% of the free float market capitalization of NSE-listed stocks.[1]The sector allocation of the NIFTY 500 reflects the diverse structure of the Indian economy, with financial services holding the dominant position. The breakdown as of October 31, 2025, is as follows:
This allocation highlights the prominence of financial services, accounting for nearly one-third of the index, followed by key growth sectors such as information technology and automobiles.[2] Emerging areas like healthcare and capital goods also contribute significantly, underscoring the index's exposure to both traditional and evolving industries.[2]Among the constituents, the top weights are held by major blue-chip companies, including HDFC Bank Ltd. (7.55%), Reliance Industries Ltd. (5.04%), and ICICI Bank Ltd. (4.81%). Other prominent examples include Bharti Airtel Ltd. (2.80%) and Infosys Ltd. (2.67%).[2] These leaders primarily span financial services, energy, and telecommunications, influencing the index's overall direction.The index's composition ensures diversity across market capitalizations, incorporating large-cap companies (typically the top 100 by market cap), mid-cap firms (ranks 101-250), and small-cap entities (ranks 251-500). This structure provides a comprehensive snapshot of the Indian equity market's breadth, balancing stability from large-caps with growth potential from mid- and small-caps.[1]
Methodology
Calculation Method
The NIFTY 500 index employs a free float market capitalization-weighted methodology to compute its value, reflecting the performance of its constituents based on their investable market capitalization. In this approach, the free float market capitalization of each stock is calculated by multiplying its share price by the number of shares outstanding and the investible weight factor (IWF), which represents the proportion of shares available for public trading, excluding promoter holdings, government stakes, strategic investments, and other locked-in shares.[12] The IWF is determined using data from the previous six months, ensuring adjustments for changes in shareholding patterns, and is applied to adjust for non-publicly tradable portions, thereby providing a more accurate measure of liquid market value.[12]The index value is derived using the following formula:\text{Index Value} = \frac{\sum (\text{Price}_i \times \text{Number of Shares}_i \times \text{IWF}_i)}{\text{Base Free Float Market Capitalization}} \times \text{Base Value}where i denotes each constituent stock, and the summation covers all 500 stocks in the index. This computation normalizes the aggregate free float market capitalization against the base period's equivalent value, scaled by the base index level of 1,000 set on January 1, 1995, to maintain continuity and comparability over time.[2][3]During market hours, the index is calculated in real-time using live prices from the National Stock Exchange (NSE), with updates disseminated every few seconds to two decimal places, allowing for intraday tracking of market movements. Official end-of-day values are finalized based on closing prices, incorporating any corporate actions or adjustments applied on a T+3 basis, while ensuring the index remains a reliable benchmark for the broader Indianequitymarket.[12][2]
Rebalancing and Maintenance
The NIFTY 500 index undergoes semi-annual rebalancing to reflect changes in the market capitalization and eligibility of constituent stocks, with reviews based on data from the six-month period ending on January 31 and July 31 each year.[12] The changes become effective on the last trading day of March and September, respectively, ensuring alignment with broader market cycles.[2] Announcements of the rebalancing decisions are made four weeks in advance and published on the official NSE Indices website (www.niftyindices.com) and NSE India portal (www.nseindia.com), providing market participants sufficient time to adjust portfolios.[12]To minimize excessive turnover and maintain stability, the rebalancing incorporates buffer rules based on market capitalization rankings and liquidity thresholds. Stocks are added if their full market capitalization ranks among the top 350 companies or is at least 1.5 times that of the 500th-ranked company, while deletions occur if a stock's rank falls below 800 or it fails other eligibility criteria such as average daily turnover.[12][2] Additionally, companies must rank within the top 800 based on average daily turnover over the previous six months combined with full market capitalization to qualify, further limiting changes to only the most significant shifts in market dynamics.[12] This approach ensures that the index composition evolves gradually, with a focus on free-float market capitalization weighting as referenced in the index's core methodology.[2]Corporate actions are handled through targeted adjustments to maintain the index's integrity without requiring full recalculations. The index level is adjusted on the ex-dividend date by the dividend amount (gross of tax for price index, net for total return) multiplied by the number of shares and IWF. For special dividends exceeding 2% of the stock's market price on the announcement date, the divisor is also adjusted in the price index.[12] Stock splits and bonus issues trigger no divisor changes but adjust the number of shares and IWFs effective on the ex-date, while mergers, demergers, or acquisitions prompt ad-hoc rebalancing if trading stabilizes at least one month post-event, updating share counts and weights accordingly.[12] These adjustments preserve the index's float-adjusted market capitalization base.Governance of the rebalancing and maintenance process is overseen by NSE Indices Limited, operating under a three-tier structure that includes the Board of Directors, the Index Advisory Committee (Equity), and the Index Maintenance Sub-Committee.[2] The Index Maintenance Sub-Committee reviews and approves changes, resolves disputes, and ensures compliance with SEBI regulations through quarterly audits, with corrective actions such as stock replacements implemented as needed.[12] The Index Oversight Committee provides additional strategic guidance to uphold transparency and methodological consistency.[12]
Performance
Historical Returns
The NIFTY 500 Total Returns Index has delivered a compound annual growth rate (CAGR) of 12.39% from its inception in January 1995 through September 30, 2025, reflecting robust long-term growth driven by the broad representation of the Indian equity market.[11] This performance underscores the index's resilience, with total returns incorporating reinvested dividends and capital gains, resulting in an overall CAGR of approximately 12.5% as of October 2025.[2] Over extended periods, such as the past 15 years, the CAGR stands at 11.97%, while shorter horizons like the last 10 years show 14.35% and the past 5 years 20.71%, highlighting accelerating momentum in recent decades.[11]Year-on-year performance has been predominantly positive, with the index posting gains in 17 out of the past 20 calendar years as of September 2025.[11] This consistency is particularly evident during volatile market conditions, where the broader diversification of the NIFTY 500 has enabled it to outperform narrower indices like the NIFTY 100 in 11 of those 20 years, capturing growth from mid- and small-cap segments that often rebound strongly post-downturns.[11]In terms of risk, the index exhibits annualized volatility of 14.49% based on recent data, aligning with a moderate risk profile for a broad-market benchmark.[2] Its beta relative to the NIFTY 50 is 0.99, indicating it moves closely in tandem with the overall Indian market without excessive sensitivity.[2] This beta of approximately 1.0 positions the NIFTY 500 as a reliable proxy for market-wide movements.The dividend yield has contributed meaningfully to total returns, averaging around 1-1.5% historically and standing at 1.14% as of October 2025, which enhances the price return performance by providing a steady income stream from the underlying companies.[2] This yield component has been especially valuable in stabilizing returns during periods of price stagnation, bolstering the index's appeal for long-term investors seeking compounded growth.
Record Values and Milestones
The NIFTY 500 index achieved its all-time high of approximately 23,973 as of November 2025, amid sustained market growth and economic resilience in India.[14] This peak reflected the index's broad representation of the top 500 companies, capturing gains across sectors like financial services and information technology during periods of global recovery and domestic policy support. By mid-2025, the index was approximately 23,800, underscoring its resilience before minor corrections.[15]In contrast, the index hit its lowest point during the global financial crisis at around 1,967 in early 2009, specifically in March, as widespread market turmoil led to sharp declines in equity valuations across emerging markets.[16] This low marked a significant trough, with the index falling over 60% from its pre-crisis levels due to liquidity constraints and international contagion effects.[17]Key milestones in the index's history include surpassing the 10,000 level in 2017, fueled by structural economic reforms and increased foreign investment inflows, and crossing 20,000 in 2023 amid a strong post-COVID rebound.[8] As of November 18, 2025, the NIFTY 500 trades at approximately 23,970, maintaining proximity to recent highs while navigating global uncertainties.[15]The index has demonstrated notable recovery patterns following major downturns, rebounding from the 2008 crisis low over nearly three years through government stimulus and banking sector stabilization, and from the 2020 COVID-19 drop in about eight months, aided by fiscal reforms and monetary easing that boosted corporate earnings. These recoveries highlight the index's alignment with India's long-term growth trajectory, often accelerated by periodic rebalancing to incorporate high-performing constituents.[18]
Related Indices and Comparisons
Other NIFTY Indices
The NIFTY indices family encompasses a range of benchmarks maintained by NSE Indices Limited, with many derived from or subsets of the NIFTY 500 universe to provide targeted exposure across market segments, strategies, and themes. These indices share a common methodology framework, including free-float market capitalization weighting and semi-annual rebalancing, ensuring consistency in tracking Indian equity performance. Launched primarily after the NIFTY 500's inception in 1995, several indices align their base dates to April 1, 2005, for historical comparability.[2]Narrower indices within the NIFTY 500 include the NIFTY 50, which tracks the top 50 companies by free-float market capitalization and forms the core large-cap benchmark, launched on April 22, 1996, with a base date of November 3, 1995, and base value of 1000.[19] The NIFTY Next 50 captures the subsequent 50 stocks (ranks 51-100), introduced on January 1, 1997, with a base date of November 3, 1996, and base value of 1000.[20] Complementing these, the NIFTY 100 combines the top 100 constituents, launched on December 1, 2005, with a base date of January 1, 2003, and base value of 1000, representing broader large- and mid-cap coverage.[21]Broader and derived indices extend the NIFTY 500's scope, such as the NIFTY Total Market Index, which incorporates all 500 NIFTY 500 stocks plus 250 microcap selections to reflect nearly the entire NSE-listed equityuniverse, launched on October 13, 2021, with a base date of April 1, 2005, and base value of 1000.[22] Strategy variants like the NIFTY 500 Value 50 select 50 undervalued stocks from the NIFTY 500 based on metrics such as earningsyield and price-to-book ratio, launched on October 24, 2018, with a base date of April 1, 2005, and base value of 1000.[23] Similarly, the NIFTY 500 Momentum 50 identifies 50 high-momentum stocks from the same universe using normalized price performance scores over six and twelve months, with a base date of April 1, 2005, and base value of 1000.[24]Thematic and sectoral indices draw constituents from the NIFTY 500 to focus on specific industries, exemplified by the NIFTY Bank, which tracks 12 major banking stocks and was launched on September 15, 2003, with a base date of January 1, 2000, and base value of 1000.[25] The NIFTY IT monitors 10 leading information technology firms, computed from a base date of January 1, 1996, with an initial base value of 1000 (revised to 100 effective May 28, 2004).[26] These indices enable sector-specific benchmarking while maintaining alignment with the broader NIFTY 500 ecosystem.[27]
Comparison with Broader Markets
The NIFTY 500 Index provides broader coverage of the Indian equity market compared to the BSE 500 Index. As of September 30, 2025, it represents approximately 91.8% of the free-float market capitalization of stocks listed on the National Stock Exchange (NSE), while the BSE 500 captures nearly 93% of the total market capitalization on the Bombay Stock Exchange (BSE).[8][28] Although both indices aim to reflect the overall market by including large-, mid-, and small-cap companies across major sectors, the NIFTY 500 is NSE-focused and incorporates stricter liquidity criteria, requiring eligible stocks to have traded on at least 90% of days in the previous six months and to rank within the top 800 by average daily turnover and full market capitalization.[29] This emphasis on liquidity distinguishes it from the BSE 500, which prioritizes market capitalization representation across 20 industries but with relatively less stringent trading volume requirements, resulting in the NIFTY 500 offering higher tradability for investors seeking NSE-listed exposure.[30]In comparison to global benchmarks like the S&P 500, the NIFTY 500 exhibits higher volatility due to its emerging market status, with annualized standard deviation typically ranging from 16-18% over recent periods, compared to the [S&P 500](/page/S&P 500)'s lower average of around 15% amid more mature economic conditions.[31][32] Despite this, the NIFTY 500 demonstrates stronger growth potential, delivering a 10-year compound annual growth rate (CAGR) of 15.8% through March 2024, surpassing the S&P 500's 15.4% over the same timeframe, driven by India's rapid economic expansion and inclusion of high-growth mid- and small-cap segments.[33] Its correlation with the MSCI Emerging Markets Index stands at approximately 0.8, reflecting strong alignment with broader emerging market trends influenced by global risk sentiment and commodity cycles, though it benefits from India's relatively insulated domestic consumption base.[34]The NIFTY 500's risk-return profile offers higher diversification than the NIFTY 50, encompassing 500 companies across market caps to reduce concentration risk, where the top 10 stocks in the NIFTY 50 account for over 50% of its weight, exposing it more to large-cap underperformance.[35][31] This broader composition lowers sector and stock-specific risks but introduces small-cap volatility not present in developed-market indices like the S&P 500, which focuses exclusively on large caps and exhibits more stable beta characteristics during global downturns.[36]During mid- and small-cap rallies, such as the post-pandemic recovery from 2020 to 2023, the NIFTY 500 outperformed the NIFTY 100, achieving a CAGR of approximately 22% compared to the NIFTY 100's 18%, as smaller companies capitalized on economic reopening and increased domestic investment flows.[6] This pattern underscores the NIFTY 500's advantage in capturing upside from broader market participation, having outperformed the NIFTY 100 in 11 of the past 20 calendar years.[8]