Nifty Total Market Index vs Nifty 50

The Nifty Total Market Index and the Nifty 50 are both important benchmarks of the Indian equity market, but they serve different purposes. While Nifty 50 focuses on a limited set of large companies, the Nifty Total Market Index reflects the performance of the broader market. Comparing the two helps investors and market participants understand differences in coverage, risk, and return behaviour.

The Nifty Total Market Index is a broad-based equity index that represents the overall performance of the Indian stock market. It includes companies across large-cap, mid-cap, and small-cap segments listed on the National Stock Exchange.

By covering a wide universe of stocks, the index captures movements across different stages of company growth. In simple terms, it provides a near-complete picture of how the Indian equity market is performing rather than focusing on a specific segment.

Nifty 50 is a benchmark index that tracks the performance of 50 of the largest and most liquid companies listed on Indian stock exchanges. These companies are leaders in their respective sectors and together represent a significant portion of the market capitalisation.

The index is widely used as a barometer of market sentiment and economic conditions. Due to its large-cap focus, Nifty 50 is often considered a measure of stability and is commonly referenced in market analysis and reporting.

The Nifty Total Market Index represents a much larger portion of the Indian equity universe, covering companies across all market-cap categories. This broad coverage allows it to reflect trends in emerging, growing, and established businesses.

In contrast, Nifty 50 represents only the largest companies, which together account for a significant but limited share of total listed market capitalisation. As a result, it reflects the performance of market leaders rather than the entire market.

Risk and volatility differ notably between the two indices. The Nifty Total Market Index includes mid-cap and small-cap stocks, which tend to be more volatile and sensitive to economic cycles. This can lead to sharper movements during market expansions or contractions.

Nifty 50, being concentrated in large-cap stocks, generally shows lower volatility. Large companies often have more stable earnings and stronger balance sheets, which can reduce fluctuations during uncertain market conditions.

Over longer periods, the Nifty Total Market Index may exhibit different growth characteristics due to its exposure to mid-cap and small-cap companies, which can perform differently across market cycles. These segments can contribute significantly during periods of economic expansion.

Nifty 50, on the other hand, reflects return patterns that are generally influenced by established, large-capitalisation companies. While its growth potential may be relatively moderate, it often provides consistency during volatile phases.

The Nifty Total Market Index offers several advantages:

• Broader diversification across market-cap segments

• Exposure to emerging and growing companies

• Improve representation of overall market trends

• Reduced dependence on a small group of large stocks
   

These features make it suitable for analysing the full market landscape.

Nifty 50 also has certain benefits:

• Focus on established and liquid companies

• Lower volatility compared to broader indices

• Easier interpretation of market movements

• Widely accepted benchmark for market performance
   

Its stability makes it useful for tracking core market sentiment.

While both indices track Indian equities, they serve different purposes. The Nifty Total Market Index captures the broader equity market, including mid- and small-cap segments, resulting in wider diversification and different risk–return characteristics compared to large-cap-focused indices. Nifty 50 focuses on large-cap companies and has historically exhibited return and volatility characteristics associated with established firms.

Points to Consider:

• Nifty Total Market Index covers all market-cap segments for comprehensive market representation

• Nifty 50 tracks only 50 large-cap stocks, emphasising stability and liquidity

• Total Market Index has higher volatility but greater diversification and growth potential

• Nifty 50 is simpler to interpret and widely used as a benchmark for market sentiment

This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.