Nifty Next 50 Index Fund is a mutual fund that mirrors the Nifty Next 50 Index, consisting of companies ranked 51st to 100th by market capitalization. This fund offers a diversified, low-cost way to invest in high-growth potential companies across various sectors. Learn about the best Nifty Next 50 Index Funds, their benefits, risks, how they compare to Nifty 50 funds, and tips for choosing the right one.
Nifty Next 50 Index Fund is a passively managed mutual fund that tracks the Nifty Next 50 Index. The Nifty Next 50 is made up of the next 50 companies ranked after the top 50 in the Nifty 50 index, which is how it gets its name.
The primary objective of this fund is to invest in the companies present in the Nifty Next 50 index and mirror their performance as closely as possible. The fund offers an excellent opportunity for investors wanting to invest in the index in a sustainable way.
List of the top-performing Nifty Next 50 mutual funds sorted by returns with their AUM and Expense Ratio.
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AUM ₹4239 Cr •
Expense 0.35%
AUM ₹6083 Cr •
Expense 0.31%
AUM ₹859 Cr •
Expense 0.26%
AUM ₹81 Cr •
Expense 0.32%
AUM ₹270 Cr •
Expense 0.36%
AUM ₹113 Cr •
Expense 0.35%
AUM ₹437 Cr •
Expense 0.11%
AUM ₹1356 Cr •
Expense 0.35%
AUM ₹1564 Cr •
Expense 0.3%
AUM ₹1168 Cr •
Expense 0.12%
AUM ₹269 Cr •
Expense 0.15%
AUM ₹164 Cr •
Expense 0.33%
AUM ₹102 Cr •
Expense 0.09%
AUM ₹11 Cr •
Expense 0.22%
Nifty Next 50, also popularly known as Nifty Junior, includes companies that rank from 51st to 100th in terms of free-float adjusted market capitalization. This means this index includes companies that have shares available for public trading.
The index represents the broader market and investors' sentiment. Meaning, if Nifty Next 50 goes up it shows that investors have optimism about the growth of these companies. Popular companies in this index include Adani Power, DLF, Varun Beverages, etc.
When you invest in the Nifty Next 50 Index fund, you are essentially investing in the 50 companies present in this index. An Asset Management Company that issues this index fund uses the pooled corpus of investors to distribute investments across the 50 companies.
Since these funds are passively managed, there’s no activity of ‘actively’ picking stocks. However, the portfolio management team of each fund ensures that the allocations are mirrored to the Nifty Next 50 Index as accurately as possible.
The index includes companies from diverse sectors and industries like financials, consumer goods, IT, etc. The Nifty Next 50 index is rebalanced on a semi-annual basis, with the cut-off date being January 31st and July 31st of each year.
Once you invest in the fund, you receive mutual fund units based on that day’s NAV. Every day, the performance of the fund is updated and reflected in the NAV. Investors earn via capital appreciation of the fund.
Companies in the Nifty Next 50 Index are essentially large-cap companies next in line after the Nifty 50. If you are exploring investing in these funds, here are some benefits:
Companies in the Next 50 index are identified by their growth potential. These stocks showcase exponential growth potential. In fact, in the past, many companies in the Nifty Next 50 list have made it to the Nifty 50 index.
Unlike sectoral or thematic mutual funds, the Nifty Next 50 index fund comprises stocks from multiple sectors. Some of which include, energy, financials, IT, etc.
One of the biggest perks of a passively managed fund is that it saves investors the hassle of individually picking stocks for their portfolio. Moreover, investors get exposure to multiple stocks at a much lower value which otherwise would not be possible if they were investing in these stocks individually.
Here are the risks associated with the Nifty Next 50 fund:
While companies within this index represent high growth potential, they are also subject to market volatility. This is because the Nifty Next 50 index represents scaling businesses that are more sensitive to economic cycles.
All passively managed funds stand the risk of being affected by ‘Tracking Error’. This error is the difference in tracking the index. Index funds try to mirror the index as closely as possible, but there may be errors for several reasons. The primary reason is that these funds reserve a certain percentage as cash to maintain liquidity. Other reasons could be rebalancing delays or policy changes.
Companies within the Nifty Next 50 may also be affected by liquidity risk. This is a risk when too many investors try to sell their investments at once, but struggle to sell without affecting the price of the stocks.
You can easily invest in the Nifty Next 50 Index Fund on INDmoney. To do this, follow the steps below:
1. Download the INDmoney app and create your free account.
2. Head to the ‘Mutual Funds’ section from the bottom menu.
3. Look for Index Funds and then click on ‘Nifty Next 50’
4. Choose a fund, investment style, amount, and invest.
While all Nifty 50 Index Funds follow the same index, not all index funds are the same. You need to carefully analyze key metrics to decide which fund is the best to invest in. These metrics include:
1. Tracking Error: Tracking error tells you how close your returns will be to the returns of the index. Compare different funds and select the one with the lowest tracking error.
2. AUM: AUM means Asset Under Management. The higher the AUM, the better it is in the case of an index fund. This is because high AUM ensures more liquidity.
3. Fund House: While these funds are not actively managed, you must still ensure you are going with a reputable AMC that has a good track record with such funds.
We’ve explained how to pick an Index Fund in detail here.
Just like a passively managed fund, an actively managed fund has its own pros and cons. For example, in the case of active management, you have to rely on a fund manager’s expertise to pick the best stocks, unlike in a fund like Nifty Next 50, where assets to invest in depend on the index.
In an actively managed fund, the index serves as a benchmark, and the objective is to beat the returns of the benchmark. At the same time, in an index fund, while the investors have full transparency of the fund’s holdings, the holdings in an active fund can change at the discretion of the fund manager and are updated on the fund's factsheet periodically.
Whether you should pick an active or passive fund depends on your investment goals and risk appetite. If you are looking for a passively managed and low-cost investment option, this could be a good fit.
Nifty 50 and Nifty Next 50 Index funds combined offer exposure to the top 100 companies by market capitalization in India; however, they differ a lot in terms of their composition, management, and returns.
Nifty 50 consists of the 50 largest companies by market cap, while Nifty Next 50 includes the next 50. Companies in the former index will also experience less volatility as compared to the latter; this is because they are more evolved and less sensitive to economic cycles.
Historically, the Nifty Next 50 index fund showed an average return of 15% in 3 years, 27.45% in 5 years, and 11.59% in 10 years. While the Nifty 50 index fund displayed an average return of 15% in 3 years, 26.4% in 5 years and 11.11% in 10 years.
In the past six months, the Edelweiss Nifty Next 50 Index Fund Direct Growth has emerged as the leader in AUM growth, witnessing an impressive addition of ₹32.7 crore. This positions it as one of the top-performing Nifty Next 50 Index mutual funds in terms of investor interest and fund growth.
Over the last six months, 1 Nifty Next 50 Index Mutual Funds have added LTIMindtree Ltd to their portfolio. This move highlights the stock’s growing appeal in the segment as a promising investment.
In contrast, Marico Ltd has been exited by 1 of 1 Nifty Next 50 Index Mutual Funds in the last six months. This shift underscores a cautious approach by fund managers toward the stock, reflecting changing market dynamics.
Over the last 6 months, Nifty Next 50 Index category has seen increased allocation towards Health, Real Estate, Utilities sectors
The Expense Ratio for the Nifty Next 50 Index Fund can be anywhere up to 0.5%. The AMC charges an expense ratio. This is a fee for managing the assets in the fund. The expense ratio of an index fund is typically lower than an actively managed fund.
Whether you hold your investment in the Nifty Next 50 fund or rebalance it depends on your risk tolerance and goals. To understand, let’s consider both scenarios:
If you hold for the long term:
If you hold your investments in the Nifty Next 50 fund for a long term, which is more than 5 years. You stand to benefit from compounding and manage to avoid short-term fluctuations. The returns of this index fund have shown a significant uptrend around 5 years. However, you still take the risk of underperformance of the fund especially during an economic downturn.
If you rebalance periodically:
If you decide to rebalance periodically, your goal is to book profits. To do this, you decide on a target allocation, for example, say you allocate 20% of your portfolio. Now you would have to constantly monitor the performance of the fund. If the index’s valuation increases, you have to consider rebalancing to reduce risk exposure.
The composition of the Nifty Next 50 index is rebalanced semi-annually. Once on 31st January and once on 31st July.
Yes, companies in the Nifty Next 50 can move from the Nifty 50. However, this depends on the performance of the company and movements in its market capitalisation. If the company performs well, it can grow large enough to be included in the top 50 companies of India, they will be included in the Nifty 50.
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