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The Nifty Smallcap 50 is a stock market index managed and maintained by NSE Indices Limited. It includes 50 small-cap companies selected based on market capitalisation and liquidity criteria. These companies fall outside the large and mid-cap segments and represent a diverse range of industries and sectors. The index serves as a representation of the small-cap segment in the Indian equity markets and is often used as a benchmark by fund managers to track the performance of small-cap portfolios.
The Nifty Smallcap 50 index was launched by NSE Indices to offer an efficient benchmark for the small-cap segment of the Indian stock market. It was designed to provide market participants with a transparent, rules-based representation of the small-cap space. Since its inception, the index has captured the performance of smaller companies that are considered to have relatively lower market capitalisation than those in the Nifty 100 and Nifty Midcap indices.
Over time, the Nifty Smallcap 50 index has undergone periodic revisions based on the eligibility criteria. These rebalancing exercises ensure that the constituents of the index continue to reflect the current market environment. Historical performance trends of the index have been tracked to assess market movements within the small-cap segment and evaluate its volatility compared to large- and mid-cap indices.
The Nifty Smallcap 50 index functions based on a specific methodology developed by NSE Indices. The index includes 50 companies that are chosen from the universe of stocks ranked 101 to 250 based on full market capitalisation within the Nifty 500. The selection is made based on liquidity, market capitalisation, and listing history.
The index is reviewed semi-annually, during which stocks that no longer meet the selection criteria are replaced. These reviews are conducted using data from a specific reference date to ensure consistency. This process allows the index to stay aligned with the evolving dynamics of the small-cap market in India.
The Nifty Smallcap 50 index serves as a reference point for evaluating the performance of smaller companies in the Indian equity markets. It is often used by asset managers, analysts, and market participants to analyse trends within the small-cap segment and to construct portfolios that mirror this section of the market.
In addition, it is frequently used for index-based investment products such as mutual funds and exchange-traded funds (ETFs). The index helps track how small-cap stocks, which are generally less represented in broader indices, perform over time relative to mid-cap and large-cap counterparts. This allows for a more nuanced view of market segmentation.
Investors looking to gain exposure to the Nifty Smallcap 50 can do so through a range of financial instruments. One common approach is by investing in index mutual funds or exchange-traded funds (ETFs) that replicate the composition and performance of the Nifty Smallcap 50.
Another method involves purchasing individual stocks that are part of the index. However, this requires careful analysis and monitoring. Many investors prefer passive strategies via ETFs or mutual funds due to the ease of diversification, lower costs, and reduced need for active management. Brokerage platforms and financial institutions provide access to such instruments linked to the Nifty Smallcap 50.
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