What is Nifty 50 ETF

What are ETFs?

Exchange Traded Funds (ETFs) are passive schemes which track market indices. ETFs invest in a basket of securities which replicate the benchmark index. Unlike actively managed mutual fund schemes, ETFs do not aim to beat the index, they merely track the index as closely as possible. Since ETFs are passive funds, they do not require the fund management effort or research support that active funds require. As a result, the cost (Total Expense Ratios or TERs) of ETFs is much lower than actively managed mutual fund schemes. The popularity of ETFs rose by leaps and bounds after the COVID-19 pandemic. As per AMFI data, in the last four years ending 31^st July 2023, ETF assets under management (AUM) grew by nearly four times (4X) at a compounded annual growth rate (CAGR) of nearly 40% (source: AMFI July 2023 data).

Read more what you need to know before you start investing in ETFs

What is Nifty 50 Index?

Nifty 50 Index, commonly referred to as the Nifty, is the benchmark index that tracks the performance of portfolio of the 50 largest companies by market capitalization in the National Stock Exchange (NSE). Market capitalization of a company is defined as the current market prices multiplied by the number of shares outstanding. The weights of the index (Nifty 50) constituents are based on free float market capitalization. Free float market capitalization means the market cap of shares held by the public and does not include shares not held by the promoters, related parties, management etc. In free float market capitalization based index, the companies with highest free float market cap will have higher weights in the index. The index is calculated on a real time basis (daily) and rebalanced semi-annually based on data for six months ending January and July.

Composition of Nifty 50 Index

Financial services, Information Technology, Oil and Gas, Consumer Goods and Automobiles are the 5 largest industry sectors in Nifty 50 Index. These 5 sectors have a combined weight of more than 70% in the Nifty 50 Index (as on 31^st July 2023, source: NSE). The table below shows the top 10 industry sectors and top 10 stocks of the Nifty 50 Index

Source: National Stock Exchange, as on 31^st July 2023

Long term performance of Nifty 50 Index

The chart below shows the growth of Rs 10,000 invested in Nifty 50 Total Returns Index (TRI) over the last 20 years. You can see that your investment would have multiplied nearly 21 times in the last 20 years. The CAGR returns on Nifty 50 TRI over the last 20 years is 16.5%

Source: National Stock Exchange, as on 31^st July 2023. Disclaimer: Past performance may or may not be sustained in the future.

What is Nifty 50 ETF?

Nifty 50 ETFs are exchange traded funds (ETFs) which track the Nifty 50 index. Nifty 50 ETFs invest in a basket of stocks that aim to replicate the Nifty 50 index. Nifty 50 ETFs are among the most popular ETFs in India. Nifty 50 ETFs are also among the most actively traded ETFs (highest trading volumes) in National Stock Exchange and Bombay Stock Exchange.

Why invest in Nifty 50 ETF?

• Nifty 50 Index is the leading equity index in India. Nifty 50 represents more than 56% of the average market capitalization of all stocks listed on the NSE (as on 31^st December 2022, source AMFI). These stocks are the most actively traded and liquid stocks in the index. Nifty 50 futures and options are the most actively traded derivatives in India.


• Nifty 50 stocks are sometimes also known as blue-chip stocks. These are the largest and most reputed companies in India, with long track records. These companies are often the market share leaders in their respective industry sectors.


• Historical data shows that Nifty 50 TRI has given superior inflation adjusted compared to other asset classes (e.g. debt, commodities etc) – see the chart above.


• Unlike actively managed equity mutual fund schemes, there is no unsystematic risk in Nifty 50 ETFs.


• The Total Expense Ratio (TER) of Nifty 50 ETFs is much lower than actively managed equity mutual fund schemes.


• Liquidity is a very important consideration in ETF investments because ETFs are bought and sold in stock exchanges, unless you are transacting in lot sizes. You should always consider liquidity when investing in ETFs.


• Nifty 50 ETFs are among the most actively traded ETFs in India (see Advisorkhoj ETF Corner). Since trading volumes of these ETFs are high, they are more liquid than thinly traded ETFs.


• There are many Nifty 50 ETF products in the market. You should select an ETF with low TER, Tracking Error and high trading volumes (see Advisorkhoj ETF Corner).

You may also like to read what are the benefits on investing in ETFs.

Who should invest in Nifty 50 ETFs?

• Investors looking for capital appreciation by investing in the largest companies in India.


• Investors with moderately high to high-risk appetites.


• Investors with minimum 5-year investment tenures.


• Investors need to have Demat and trading accounts to invest in Nifty 50 ETFs.


• Investors should consult with their financial advisors / stockbrokers if Nifty 50 ETFs are suitable for their investment needs.

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