What is Nifty 500 Index and How to Invest?

Did you know that you can invest in almost the entire Indian stock market through just one index, the Nifty 500? Exactly, since 1994, the Nifty 500 has sharply grown into one of the most widely exposed indices in the Indian stock market.

However, many investors stuck with only on just 50 companies, they missed out on the bigger picture. Additionally, Nifty 500 captures nearly 92% of India’s total market capitalisation across 500 top companies from 18+ sectors, with the entire Indian equity market.

The Nifty 500 Index is easily accessible today via Index Funds, ETFs or SIPs, offering simple, low-cost diversification to grow with India’s economic rise.

What is Nifty 500?

In simple words, the Nifty 500 is a stock market index that tracks the performance of the top 500 companies listed on the National Stock Exchange (NSE) in India. These companies come from different ranges of industries and sizes, with market capitalizations, large to mid and small. Additionally, it represents over 92 % of the free float market capitalization based on the Indian stock market.

The Nifty 500 acts as a benchmark to measure the performance of the whole stock market in India. Many Mutual Funds, ETFs and index funds, direct equity via trading APIs or stockbrokers making it easy for retail investors to invest in the market to get high returns.

A reliable index that has already breached the 17,000-mark index value. The Nifty 500 Momentum 50 Index tracks the performance of 50 stocks that are selected based on a normalized momentum score from the Nifty 500 index.

This index is owned by NSE & formed from a combination of component indices including the Nifty 50 index, Nifty Next 50 index, Nifty 500 TRI, Nifty Midcap 150 index & Nifty Small Cap 250 Index.

Now, let us explore the next headline: how the Nifty 500 index is calculated.

How is NIFTY 500 Calculated?

The NIFTY 500 index is calculated based on a method of free-float market capitalization. The free-float method only includes the shares that are available for public trading. Here is the formula for the Nifty 500 calculation

Nifty 500 Index Value = (Free-float market cap/ Base Free-Float Market Cap) * Base value of Nifty 500 Index

Base Year: 1994
Base Value: 1000
Index Value: Changes daily based on share prices and market trends.

The Nifty 500 index is rebalanced semi-annually in March and September. In this index, the companies that do not fulfil the required eligibility criteria are removed and new ones are added. Additionally, the index changes daily as stock prices fluctuate, it gives real-time market performance.

Moving on to the next headline, let’s see the core benefits of Nifty 500 in detail.

Benefits of Investing in the Nifty 500 Index Fund

The Nifty 500 offers majors key benefits. Here is who can benefit:

Beginner Investors
Beginner are doing not need to pick any individual stocks due to Nifty 500 invest in India’s top companies. Investor can start investing through any mutual fund.

Long-Term Wealth Builders
Those investing for long-term goals, like retirement, children’s education or future savings, can benefit from lumpsum or the compounded growth of the Indian market over time.

Passive Investors
This index helps you avoid stock picking or market timing. The Nifty 500 index fund offers passive investing with low costs.

Investors Looking for Diversification
Nifty 500 indices cover large, mid & small cap stocks of various industries like financial services, IT, healthcare, energy and FMCG. This helps mitigate sector-specific risk and balance portfolio stability.

Systematic Investment Plan
If you prefer to invest a fixed amount every month at a regular interval, Nifty 500 index funds are great for SIP investing. They help with rupee-cost averaging.

Cost-Effective
This index has lower expense ratios than other actively managed mutual funds, making it best for investors who prefer cost-efficiency.
Broader Market Exposure
The Nifty 500 gives you exposure to 92% of the Indian stock market. This shows a wider reflection of overall market growth in all sectors.

Pro Tip: Know your future returns using the SIP Calculator in 3 easy steps.

How to Invest in Nifty 500?

There are many ways to invest in the Indian stock market through the Nifty 500 index. Here is how:

1. Index Funds

The simplest and most popular way to invest in the Nifty 500 is through Index funds.
These are mutual fundsthat track the Nifty 500 Index.
Managed passively, with low expense ratios.
Investors can invest via platforms or directly through mutual fund websites.

2. ETFs (Exchange-Traded Funds)

ETFs also track the Nifty 500 and trade like stocks on the NSE.
You need a demat accountand login access through a share broker.
Offers flexibility to buy or sell anytime during market trading hours.
Mostly aligns with long-term investors, beginners and NRIs.

3. Invest in Individual Stocks

You can also invest in individual Nifty 500 companiesbased on your research.
Use the index as a benchmark to compare the peer performance of funds.
This method requires time, research and risk management.
This is ideal for active investors, not for beginners.

4. NRI Investment in Nifty 500

NRIs can invest through Portfolio Investment Scheme (PINS), Non-Resident Ordinary account (NRO),NRE accounts via registered brokers and MFs and ETFs.
Ensure you have KYC compliance and adhere to FEMA rules.

Key Points:

A demat or trading accountis required for ETFs or direct stocks.
A mutual fund app/platform for index funds & SIPs.
Login access to track your investments through the investor’s home or member’s home on investment portals.

This brings us to the next part of the sectors and financial metrics of nifty companies.

Nifty 500 Companies, Sectors with Financial Metrics

Here are the companies, sectors and metrics of the Nifty 500 index:

The Nifty 500 Index includes the top 500 companies listed on the NSE. These companies are spread in diverse sectors such as financial services, capital goods, healthcare, chemicals, automobile and auto components, consumer durables, oil, gas & consumable fuels, construction materials and other diversified industries.
Companies are selected based on their market size, liquidity and trading activity and are tracked using key performance indicators such as CAGR, return on capital employed, dividend yield, sales and quarterly profit.
For first-time investors or professionals, platforms like investors’ home, members’ homeand corporate home on the NSE provide access to market data products, historical reports and option chains.
Additional tools like the NCFM portal, NSE knowledge hub and cogencis iInvestsupport fundamental and technical analysis, while services like smartODR offer support for company compliance information and detailed product information for investors and analysts.

Also read: 11 Common Mistakes to Avoid While Investing in Mutual Funds.

Let us walk through the eligibility and criteria for the Nifty 500 index.

Eligibility and Criteria for NIFTY 500

Before opting for any stock, know the criteria and eligibility of Nifty 500 set by NSE. Let us break down

Listed on NSE

The companies of the stock must be listed and actively traded on the National Stock Exchange of Indiaand should be ranked among the top 800 companies based on full market capitalization and average daily trading turnover.

Liquidity Condition

The stock should have been traded on at least 90% of trading days in the last 6 months.

Top 350 Market Cap Rule

If a stock ranks within the top 350 companies by full market cap, it is automatically added for index consideration.

New Listings

If a company is newly listed, eligibility is based on data from the last 3 months. For existing stocks, 6 months is used.

Semi-Annual Rebalancing

The Nifty 500 index is rebalanced twice a year in March and September. During this time, Stocks that no longer meet the criteria are removed and eligible new companies are added.

Industry Representation

The index includes 500 stocks from 18 different industry sectors and creates a diversified, sector-balanced index, reflecting the overall Indian stock market.

Must Read: SIP or Lumpsum, which is better for you in 2025

But why is the Nifty 500 so crucial in the stock market? The following explanation will answer these questions.

Why Is the Nifty 500 Index So Crucial in Stock Markets?

There are many other indices, but here are the points that make the Nifty 500 index crucial:

The Nifty 500 index indicates around 92% of the total market cap of all NSE-listed companies in India. This is used to gauge the performance of the entire stock market.
This includes companies from 18 different sectors. This shows the overview of the stock like banking stocks, healthcare and consumer services.
This index is linked with ETFs and MFs, making it accessible for retail investors via systematic investment plans rupee-cost averaging.
Nifty 500 index reconstituted or rebalanced so relevant stocks remain.
Index can be used for benchmarking, analysing market research and to know the performance of funds.
Nifty 500 broader than Sensex or BSE Sensex, making it more reliable for long-term market tracking.

In the next heading, you will see a comparison of “Nifty 500 or Nifty 50 Index”.

Comparison between Nifty 500 Index vs Nifty 50 Index

The table below shows the comparison of the Nifty 500 index vs the Nifty 50 Index with features:

Feature	Nifty 500 Index	Nifty 50 Index
Number of Companies	500 companies	50 companies
Market Coverage	90–95% of the total market capitalization on NSE	51% of total market capitalization on NSE
Company Types	Includes large, mid and small-cap stocks	Large-cap companies
Diversification	High – across 18+ sectors and all market sizes	Moderate – mostly large-cap and blue-chip companies
Volatility	Slightly higher due to small/mid-cap exposure	Lower – more stable large-cap stocks
Risk Level	Moderately high (includes smaller companies)	Lower (fewer stocks, all large caps)
Ideal For	Long-term, growth-focused, diversified investors	Conservative or stable-return investors
Index Composition	Based on free-float market cap across top 800 stocks	Top 50 liquid large-cap stocks by free-float market cap
Rebalancing Frequency	Semi-annually (twice a year)	Semi-annually (twice a year)
Use in Funds/ETFs	Used by diversified index funds, multi-cap ETFs	Used in blue-chip, large-cap funds and ETFs
Launch Year	1994	1996

Conclusion

To wrap up, the Nifty 500 Index is one of the most diversified and reliable benchmarks in the Indian stock market. Covering companies from full market capitalization across 18+ sectors, it provides investors a view of India’s equity market with financial commodities, products and services.

The Nifty 500 offers a strong foundation for long-term wealth creation. With India’s growth story, it is a great option for anyone looking to invest smartly and consistently.

By investing in Nifty 500, you are not just buying into companies; you are participating in the future of India’s economy. So take your first step by starting small through SIP, stay consistent and let the power of the Nifty 500 work for you.

Frequently Based Questions

1. Who should invest in the Nifty 500 Index?

Long-term investors, beginners and those who prefer a diversified portfolio can enjoy investing in the Nifty 500 Index through index funds or ETFs

2. Is the Nifty 500 a good investment for beginners?

Yes, the Nifty 500 is beginner-friendly when investing through index funds or ETFs. It offers diversification and lower risk, making it a smart choice for beginners.

3. What is the minimum amount to invest in a Nifty 500 Index Fund?

You can start with as little as Rs 100–Rs 500 through a SIP in a Nifty 500 Index Fund, depending on the AMC Asset Management Company.

4. Which Nifty 500 Index Funds are best in India?

Best Nifty 500 index funds include:

Motilal Oswal Nifty 500 Fund
ICICI Prudential Nifty 500 Index Fund
Navi Nifty 500 Index Fund

5. Is the Nifty 500 Index suitable for long-term investing?

Yes, due to its wider diversification and alignment with India’s economic growth, the Nifty 500 Index is ideal for long-term investors who want to grow wealth.