The Next Generation of Market Leaders: A Fresh Look at Nifty Next 50's Corporate Landscape 15Jan2026
About 18 months ago, I wrote about the Nifty Next 50 Index, trying to look beyond headline returns and understand what was really driving its performance.
At the time, the index was enjoying strong investor interest* following the lows of Mar2023, but I flagged a less discussed risk — the rising concentration of a few corporate groups and public sector entities.
(* one year return for Nifty Next 50 was about 60 per cent at that time, while Nifty 50 itself delivered 22 per cent returns)
That analysis was based on data as of 30Ap2024. Since then, markets have moved on, leadership has shifted and the index itself has evolved. This makes it a good moment to revisit those observations and see how they have held up.
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Adani Stocks Meltdown and Nifty Next 50 Index 15Feb2023
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1. Past performance: Nifty Next 50 versus Nifty 50
Since that Apr2024 analysis (published on 13May2024), the performance gap between the Nifty 50 and the Nifty Next 50 has been telling. Over this period, the Nifty 50 delivered a return of about 14 per cent, while the Nifty Next 50 managed roughly 6 per cent.
This divergence reinforces an important point: market leadership has been concentrated in a relatively small set of large-cap stocks, many of which already sit firmly inside the Nifty 50.
For the Nifty Next 50, this underperformance is not accidental.
The Nifty Next 50 is designed as a transition index, where emerging large cap stocks either grow into the Nifty 50 or lose momentum and drop out. When market leadership is narrow, the strongest performers in the Next 50 tend to migrate quickly to the Nifty 50, limiting how much upside the index can capture.
As a result, the Nifty 50 often outperforms during such phases because it retains the winners, while the Nifty Next 50 continuously hands them over.
In hindsight, this relative performance supports the concerns raised in May2024 about concentration risk and leadership churn.
2. The gap between index returns and passive funds
While the Nifty Next 50 index itself delivered close to 6 per cent in absolute terms, exchange traded funds (ETFs) and index funds tracking the index returned only around 3.5 per cent to 4.3 per cent over the same period (May2024 to now).
This gap highlights a practical reality of passive investing. ETFs need to replicate the entire index, manage liquidity, handle rebalancing and deal with corporate actions.
When returns are driven by a few concentrated names or groups, these frictions -- in addition to expense ratios -- become more noticeable.
As a result, investors often experience returns that are lower than the headline index numbers, especially in periods of stress.
3. How the index composition has changed over the last year
Looking at the current composition of the Nifty Next 50 provides useful context. The movement of the top 15 stocks over the last four quarters shows healthy churn. No single stock dominates the index, and several leaders from earlier periods have either moved up to the Nifty 50 or seen their weights decline.
For example, InterGlobe Avaition and Eternal (Zomato) moved up the ladder to Nifty 50.
This confirms the index’s role as a stepping stone rather than a destination.
Top 15 Stocks in Nifty Next 50 Index over past 4 quarters >
Please click on the chart to view better >
4. Corporate Group Concentration
At the corporate group level, however, the shifts are more revealing. Since 30Apr2024, the combined share of public sector undertakings (PSUs) and public sector banks (PSBs) has come down from 30 per cent to 25 per cent, reflecting both moderation in performance and migration of some leaders.
The weight of multinational companies has also declined from 9.5 per cent to 7.9 per cent, as has the share of the Tata Group.
In contrast, the Adani Group’s share in the Nifty Next 50 has increased over this period, from 4.6 per cent to 6.8 per cent. This change illustrates how concentration risk does not disappear — it simply changes form.
Government-linked dominance has reduced, but private conglomerate influence has grown, reshaping the risk profile of the index.
Break-up of Nifty Next 50: Corporate Group Concentration >
5. Why corporate group concentration matters in the Nifty Next 50
At first glance, a 50-stock index like the Nifty Next 50 appears sufficiently diversified, especially when it spans multiple sectors and business models. Index providers also follow well-defined rules around free float, liquidity and rebalancing, which limits excessive exposure to any single stock.
However, diversification at the stock or sector level does not automatically eliminate risk at the corporate group level.
Companies belonging to the same group often share management, capital allocation decisions, funding structures and regulatory or policy exposure. As a result, stress at the group level can lead to simultaneous declines across multiple stocks, even if they operate in different sectors.
This risk became clearly visible in Jan2023, when several Adani Group stocks underwent a meltdown following the Hindenburg report, reminding investors that group-level issues can override sector classifications and stock-specific narratives.
In a matter of weeks, Adani Group companies lost nearly 50 per cent of their combined market capitalisation — amounting to over Rs 9 lakh crore — in the aftermath of the Hindenburg report.
At that time, Adani Group stocks represented about 10.3 per cent of the Nifty Next 50, and the impact on the index was significant, as documented in a Feb2023 article on the meltdown and its effect on the index.
This episode shows how group-level shocks can be passed on directly to index performance and why investors cannot rely solely on broad sector labels. Even when an index looks diversified on paper, common exposures within a corporate group can create hidden correlation risk that reveals itself only during stress events.
For investors, this is why examining corporate group concentration remains important. While indices like the Nifty Next 50 are well constructed, understanding which groups dominate them helps identify hidden correlations and potential sources of volatility.
Group concentration does not make an index unattractive, but ignoring it can lead to misplaced expectations about diversification and risk.
6. Closing thoughts
The evolution of the Nifty Next 50 since Apr2024 shows that concentration risk is not a theoretical concern. It influences relative performance, affects passive returns and changes the character of the index over time. A fresh look at the index today confirms its strengths, but also reinforces the importance of looking under the hood before investing.
The last 18 months show that corporate group concentration is a real risk, not just a theoretical concern. The Adani Group episode in early 2023, when its stocks accounted for over 10 per cent of the Nifty Next 50, highlighted how group-level stress can spill over into index performance.
Since Apr2024, PSU and PSB weights have declined while private conglomerate exposure, like the Adani Group, has increased.
Overall, the Nifty Next 50 remains a pipeline for future market leaders, but it reinforces the lesson that indices deserve the same scrutiny as individual stocks.
Little gem
The top five stocks in the Nifty Next 50 index are:
Vedanta Ltd
TVS Motor Company
Hindustan Aeronautics
Divi's Laboratories
Bharat Petroleum Corporation
Which of them is likely to transition to Nifty 50 in the next, say, one year?
My educated guess, based on the past index rejig, price momentum and liquidity factors is: The probability of TVS Motor Company or a Vedanta Ltd moving upward to Nifty 50 is high.
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References and additional data:
Tweet thread 13May2024 on Nifty Next 50 Index
Nippon India ETF Nifty Next 50 Junior BeES - Rupee Vest
Nifty Next 50 Top 10 Sectors as of 31Dec2025 >
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