Should you pick Nifty 500 Multicap 50:25:25, Nifty 500, or Nifty LargeMidcap 250 Index Fund? Find the winner using 21 years of NSE TRI data.
In my earlier article on Nifty 50 vs Nifty 500 Index Fund, the conclusion was clear — Nifty 500 is a practical core holding for most long-term investors. But many readers (especially Prasanna in the comments) raised a valid follow-up question — what if I want a little more spice in my portfolio? Should I look at the Nifty 500 Multicap 50:25:25 or the Nifty LargeMidcap 250 Index instead of plain Nifty 500?
This is the natural next question once you have moved past Nifty 50. Both Nifty 500 Multicap 50:25:25 and Nifty LargeMidcap 250 promise higher returns by tilting more aggressively toward mid and small caps. But do they actually deliver enough extra return to compensate for the extra risk? And between the two of them, which one is structurally better?
In this article, I have analysed actual NSE TRI data from 1st April 2005 to 16th June 2026 — 21.2 years, two major crashes (2008 and COVID), and 5,259 daily observations per index. I have looked at lump sum returns, drawdowns, rolling CAGR across 1, 3, 5, and 10 year windows, rolling volatility across all four windows, and rolling SIP XIRR across all four windows.
One important methodology note up front. I will show data across 1Y, 3Y, 5Y, and 10Y windows for completeness — so you can see how each index behaves at every horizon. But the verdict at the end is based purely on the LONGEST available data: full 21.2-year lump sum performance and 10-year rolling windows. Short windows (1Y, 3Y, even 5Y) reflect entry and exit timing luck more than they reflect index structure. Judging an equity index on short-window worst-case numbers tells you about the bad market timing of the period, not about the index itself. For equity indices, structure is revealed only over long horizons.
Before we look at the data, let us understand what each of these three indices actually owns. The differences are not small — they decide everything that follows.
The Nifty 500 covers India’s top 500 listed companies and represents approximately 92.3% of NSE’s total free-float market capitalisation. This is the broadest benchmark of the three. Most importantly, it is fully market-cap weighted — every stock gets a weight equal to its actual size in the market. The approximate current composition is roughly Nifty 50 large caps at 58.6%, Nifty Next 50 at 12.2%, Nifty Midcap 150 at 18.5%, and Nifty SmallCap 250 at 10.7%. This means your mid and small cap exposure is real, but proportional to economic weight — no forced allocation.
The Nifty LargeMidcap 250 takes the Nifty 100 (the 100 largest stocks) and the Nifty Midcap 150, and mandatorily allocates 50% to each segment — reset quarterly. It is not market-cap weighted at the segment level. It is a rule-based 50:50 split between large caps and mid caps. There is no small cap exposure at all. Mid caps are structurally forced to be 50% of the portfolio, far higher than their natural ~18% weight in the broader market.
This index goes one step further. It allocates 50% to large caps (top 100), 25% to mid caps (next 150), and 25% to small caps (next 250) — reset quarterly. So mid cap weight is roughly the same as market-cap natural weight, but small cap weight is more than doubled (25% vs market natural ~10–11%). The quarterly reset forces sell-high and buy-low behaviour automatically — when small caps run up, they get trimmed; when they crash, they get bought.
The structural difference between these three is the entire story of this article. Nifty 500 is “own the market as is”. NLM 250 is “force 50% mid cap, no small cap”. Nifty 500 Multicap 50:25:25 is “force 50% large + 25% mid + 25% small with quarterly rebalancing”.
Let us start with the simplest question — and the most important one. What if someone invested Rs.1 lakh in each of these three indices on 1st April 2005 and held all the way through to 16th June 2026? What is the value today?
This is the only true “full available history” lump sum test we can run, because that is when the Nifty LargeMidcap 250 and Nifty 500 Multicap 50:25:25 data begins. The window is 21.2 years and covers two of the largest market crashes in modern Indian history.
| Index | CAGR p.a. | Rs.1L – 21.2Y | Max Drawdown | Composition |
| Nifty 500 TRI | 14.09% | Rs.16.37 L | -63.7% | Market-cap weighted |
| Nifty LargeMidcap 250 TRI | 15.55% | Rs.21.45 L | -67.6% | 50% large + 50% mid |
| Nifty 500 Multicap 50:25:25 TRI | 15.50% | Rs.21.24 L | -66.8% | 50% large + 25% mid + 25% small |
The full-history numbers are unambiguous. NLM 250 and Nifty 500 Multicap 50:25:25 are statistical twins on absolute return — Rs.21.45L vs Rs.21.24L. Both beat Nifty 500 by ~Rs.5 lakh over 21 years, or roughly 1.4–1.5% extra CAGR.
The cost is real — max drawdown is about 4 percentage points deeper (-67% vs -63.7%). And in real index funds, the headline 1.5pp gap typically shrinks to ~1pp after expense ratios, tracking error, and impact costs of quarterly rebalancing. We will come back to whether that residual gap is worth the structural complexity in the analysis section.
Over the full 21.2 years, NLM 250 (Rs.21.45L) and Multicap 50:25:25 (Rs.21.24L) are tied for first on backtested return.
Nifty 500 delivered Rs.16.37L — Rs.5 lakh less on a Rs.1 lakh investment.
Headline return gap of ~1.5pp shrinks to ~1pp in real funds after expense ratios and tracking error. Still real, but smaller.
The lump sum chart tells you where you ended. The drawdown chart tells you what you had to live through. Drawdown measures how far below its all-time high each index was at any point in time. This is the actual pain a real investor felt in their portfolio during the worst phases.
The 2008 Global Financial Crisis
This is the deepest crash in all three indices’ history.
Read that last line again. The Nifty 500 Multicap 50:25:25 fell almost as hard as NLM 250, but recovered to a new high in 1.6 years versus 5+ years for the other two. This is the quarterly rebalancing of the Multicap doing real work — when small caps crashed in 2008, the 25% small cap allocation kept buying them at low prices. When they bounced sharply in 2009–10, the Multicap captured the full rebound.
The 2018–2020 Mid/Small Cap Bear + COVID Combo
The Multicap 50:25:25 entered a drawdown on 23 January 2018 — well before COVID — because of the mid/small cap bear market that lasted till March 2020. Combined with COVID, the total drawdown reached -41.7% over 790 days.
For comparison, NLM 250 lost -37.8% in just 59 days (COVID-only crash). Nifty 500 lost -38.1% in 66 days.
In 2008, Multicap 50:25:25 recovered in 1.6 years vs 5+ years for the other two — quarterly rebalancing pays off in V-shaped recoveries.
In 2018–2020, Multicap 50:25:25 had the worst drawdown at -41.7% because small caps stayed weak for 2+ years.
Nifty 500 had the shallowest absolute worst drawdown (-63.7%) — but only by 4pp. The recovery time matters more, and Multicap led on that count.
A single point-to-point CAGR is dependent on entry-date luck. The honest way to compare indices is to compute the return for every possible holding period in the dataset.
I will walk through all four windows — 1Y, 3Y, 5Y, and 10Y — so you can see the full picture. But my verdict at the end will lean on the 10Y data, because that is where the structural return premium becomes evident and entry-date luck is averaged out.
| Index | Min | Median | Mean | Max | % Negative | # Windows |
| Nifty 500 | -59.2% | 12.0% | 16.7% | 118.7% | 19.3% | 5008 |
| Nifty LargeMidcap 250 | -62.1% | 13.3% | 18.7% | 138.3% | 18.8% | 5008 |
| Nifty 500 Multicap 50:25:25 | -61.2% | 12.1% | 18.7% | 141.9% | 21.6% | 5008 |
At 1-year holding, all three indices swing from roughly +120% to -60%. This is essentially noise — equity over 1 year is not a serious investment, it is a market timing bet. The mean ordering (NLM 250 = Multicap > Nifty 500) is consistent with the long-term story, but the worst-case numbers at this horizon should not be used to choose between indices.
Mean 1Y CAGR — NLM 250 18.65%, Multicap 50:25:25 18.73%, Nifty 500 16.70%.
Worst-case numbers at 1Y are dominated by entry timing — they tell you about 2008/2020, not about the index.
At 1 year, equity is the wrong asset class. Use these numbers only for context.
| Index | Min | Median | Mean | Max | % Negative |
| Nifty 500 | -9.0% | 13.6% | 13.0% | 38.3% | 5.8% |
| Nifty LargeMidcap 250 | -12.0% | 15.7% | 14.6% | 37.6% | 6.6% |
| Nifty 500 Multicap 50:25:25 | -10.7% | 15.3% | 14.5% | 38.2% | 7.8% |
At 3 years, the mean CAGR clearly favours the tilted indices — NLM 250 14.56%, Multicap 50:25:25 14.48%, Nifty 500 12.98%. The ~1.5pp gap shows up consistently.
The worst-case and negative-frequency numbers vary, but again, these are too short a window to base an equity index decision on. The 3-year minimums reflect specific bad-luck entry points around 2008, not structural inferiority.
Mean 3Y CAGR — NLM 250 14.56%, Multicap 50:25:25 14.48%, Nifty 500 12.98%. The ~1.5pp premium for tilted indices is consistent.
Median 3Y CAGR — NLM 250 15.67%, Multicap 50:25:25 15.29%, Nifty 500 13.58%. Same pattern.
3 years is still too short a window to be the basis for index selection.
| Index | Min | Median | Mean | Max | % Negative |
| Nifty 500 | -1.4% | 13.6% | 13.1% | 28.9% | 1.0% |
| Nifty LargeMidcap 250 | -1.5% | 15.2% | 14.7% | 31.7% | 0.8% |
| Nifty 500 Multicap 50:25:25 | -1.6% | 14.9% | 14.5% | 32.6% | 0.5% |
At 5 years, equity investing finally starts behaving like equity investing. Negative 5-year periods have collapsed to less than 1% for every index. The mean CAGR ordering is rock solid — NLM 250 14.69%, Multicap 50:25:25 14.53%, Nifty 500 13.08%.
Notice that Multicap 50:25:25 has the LOWEST negative-period frequency at 5 years (0.5%) — half that of Nifty 500. The forced rebalancing smooths multi-year experience.
Mean 5Y CAGR — NLM 250 14.69%, Multicap 50:25:25 14.53%, Nifty 500 13.08%. Tilted indices win by ~1.5pp.
Multicap 50:25:25 has the LOWEST negative-5Y frequency (0.5%) — quarterly rebalancing helps.
5 years is getting closer to the right horizon, but 10 years is the gold standard for index decisions.
| Index | Min | Median | Mean | Max | % Negative |
| Nifty 500 | 5.0% | 13.5% | 12.8% | 18.2% | 0% |
| Nifty LargeMidcap 250 | 6.4% | 15.1% | 14.5% | 20.7% | 0% |
| Nifty 500 Multicap 50:25:25 | 5.5% | 14.7% | 14.1% | 20.3% | 0% |
This is the window that matters most for picking an equity index. The 10-year rolling data covers 2,775 different windows — every possible 10-year holding period in the dataset. Look at three things:
This is critical. At shorter windows (3Y, 5Y), Nifty 500 had cleaner worst-case numbers. At 10 years, that flips — NLM 250 has both the highest mean AND the highest floor. Multicap 50:25:25 sits right behind NLM 250 on both metrics. Nifty 500 trails on both.
Zero negative 10-year periods for any of the three indices. Patient investors always won.
Mean 10Y CAGR — NLM 250 14.50%, Multicap 50:25:25 14.15%, Nifty 500 12.76%. Clear ordering.
Floor 10Y CAGR — NLM 250 6.4%, Multicap 50:25:25 5.5%, Nifty 500 5.0%. Same ordering — tilted indices win on the floor too.
Over the right horizon, tilted indices deliver more return AND better worst-case. That is the answer.
Rolling standard deviation measures actual experienced volatility — how much returns bounced around for each rolling holding period. The most honest measure of “how stressful was holding this index?”
| Index | Average | Min | Max |
| Nifty 500 | 18.79% | 9.54% | 44.26% |
| Nifty LargeMidcap 250 | 18.80% | 9.67% | 42.82% |
| Nifty 500 Multicap 50:25:25 | 18.74% | 9.84% | 40.88% |
The average 1-year rolling standard deviations of all three indices are within 0.06 percentage points of each other. Eighteen-point-eight percent. For all three.
Volatility at 1Y is essentially identical across all three (~18.8%).
Higher tilt does NOT mean higher volatility when quarterly rebalancing is built in.
| Index | Average | Min | Max |
| Nifty 500 | 19.34% | 12.00% | 35.07% |
| Nifty LargeMidcap 250 | 19.26% | 12.54% | 34.19% |
| Nifty 500 Multicap 50:25:25 | 19.16% | 12.91% | 32.92% |
Same pattern at 3 years. All three within 0.2 percentage points. The tilted indices are slightly LESS volatile than Nifty 500, not more.
| Index | Average | Min | Max |
| Nifty 500 | 19.10% | 13.64% | 29.74% |
| Nifty LargeMidcap 250 | 18.98% | 14.05% | 29.24% |
| Nifty 500 Multicap 50:25:25 | 18.91% | 14.51% | 28.27% |
Multicap 50:25:25 has the LOWEST average volatility (18.91%), NLM 250 in the middle (18.98%), and Nifty 500 the HIGHEST (19.10%). Yes — the so-called “more aggressive” Multicap 50:25:25 is the least volatile of the three at 5 years. The quarterly rebalancing offsets the higher mid/small cap weight.
| Index | Average | Min | Max |
| Nifty 500 | 18.47% | 15.01% | 23.98% |
| Nifty LargeMidcap 250 | 18.37% | 15.12% | 23.61% |
| Nifty 500 Multicap 50:25:25 | 18.35% | 15.31% | 23.10% |
At the most important window — 10 years — Multicap 50:25:25 has the LOWEST average volatility (18.35%), then NLM 250 (18.37%), then Nifty 500 (18.47%). The gap is tiny but the ordering is consistent. The tilted indices deliver +1.5pp extra mean CAGR over Nifty 500 with NO extra volatility cost.
At 10 years, the tilted indices deliver more return AND slightly LESS volatility than Nifty 500.
This is the closest thing to a “free lunch” you will see in equity index analysis. The structural premium is real.
Lump sum analysis assumes someone had Rs.1 lakh sitting around in April 2005. Most Indians invest through monthly SIPs. SIP XIRR is the more relevant metric for the typical investor.
I have computed the SIP XIRR for Rs.10,000 monthly SIPs across every possible 1, 3, 5, and 10 year window in the dataset. Again — the verdict should lean on the 10-year window. The shorter windows are useful context but not decision criteria.
| Index | Min | Median | Mean | Max | % Negative | # Windows |
| Nifty 500 | -69.2% | 13.0% | 17.5% | 116.7% | 25.1% | 243 |
| Nifty LargeMidcap 250 | -72.5% | 14.5% | 19.6% | 134.2% | 23.5% | 243 |
| Nifty 500 Multicap 50:25:25 | -71.6% | 13.7% | 19.7% | 136.6% | 24.3% | 243 |
A 1-year SIP is essentially gambling — XIRR ranged from -72% to +137% across the three indices. Mean ordering is consistent with longer windows (tilted > broad), but worst-case is dominated by 2008. Do not use 1Y SIP numbers to pick an index.
Mean 1Y SIP XIRR — Multicap 50:25:25 19.7%, NLM 250 19.6%, Nifty 500 17.5%.
1-year SIPs are not a serious investing strategy — these numbers are context, not decision.
| Index | Min | Median | Mean | Max | % Negative | # Windows |
| Nifty 500 | -26.5% | 14.4% | 13.1% | 31.6% | 7.8% | 219 |
| Nifty LargeMidcap 250 | -30.0% | 17.3% | 14.8% | 34.7% | 8.7% | 219 |
| Nifty 500 Multicap 50:25:25 | -28.6% | 17.1% | 14.8% | 35.7% | 10.5% | 219 |
At 3 years, the tilted indices show a clear ~1.7pp mean XIRR premium. Median is roughly 3pp higher. The worst-case losses and negative frequency vary slightly, but again — 3 years is too short a window to make an equity index decision on. The bad 3-year SIP windows are mostly those ending in 2008–09.
Mean 3Y SIP XIRR — NLM 250 14.8%, Multicap 50:25:25 14.8%, Nifty 500 13.1%.
Median 3Y SIP XIRR — NLM 250 17.3%, Multicap 50:25:25 17.1%, Nifty 500 14.4%.
Tilted indices outperform on central tendency. Worst-case at 3 years reflects 2008, not index quality.
| Index | Min | Median | Mean | Max | % Negative | # Windows |
| Nifty 500 | -5.8% | 14.5% | 13.5% | 26.0% | 0.5% | 195 |
| Nifty LargeMidcap 250 | -5.9% | 17.1% | 15.3% | 29.3% | 0.5% | 195 |
| Nifty 500 Multicap 50:25:25 | -8.3% | 16.9% | 15.2% | 29.8% | 1.5% | 195 |
At 5 years, the tilted indices give a ~1.8pp mean XIRR premium over Nifty 500. Negative-period frequency is below 1% for two of the three, and only 1.5% for Multicap 50:25:25. Equity at 5 years is starting to be safe. But 10 years is where the structure truly shows.
Mean 5Y SIP XIRR — NLM 250 15.3%, Multicap 50:25:25 15.2%, Nifty 500 13.5%.
Median 5Y SIP XIRR — NLM 250 17.1%, Multicap 50:25:25 16.9%, Nifty 500 14.5%.
All three indices had less than 2% negative 5Y SIP windows. Equity at 5 years is mostly safe.
| Index | Min | Median | Mean | Max | % Negative | # Windows |
| Nifty 500 | 3.9% | 13.7% | 13.4% | 18.4% | 0% | 135 |
| Nifty LargeMidcap 250 | 5.2% | 15.7% | 15.3% | 20.4% | 0% | 135 |
| Nifty 500 Multicap 50:25:25 | 3.7% | 15.3% | 14.8% | 20.1% | 0% | 135 |
The 10-year SIP window confirms what the 10-year rolling CAGR already showed. Zero negative periods for any index. And NLM 250 wins on both mean AND floor:
NLM 250 led on mean, median, AND floor at the 10-year SIP horizon. Multicap 50:25:25 trailed slightly on the floor (just below Nifty 500) because of the 2018-2020 small cap bear cycle. But its mean XIRR was still 1.4pp higher than Nifty 500.
Zero negative 10-year SIP windows for any of the three indices. Patient SIP investors always won.
NLM 250 led on mean (15.3%), median (15.7%), AND floor (5.2%) at 10-year SIPs.
Multicap 50:25:25 close second on mean and median (14.8% and 15.3%), slightly trailing on floor.
Nifty 500’s mean (13.4%) was 1.4–1.9pp behind both tilted indices.
After looking at lump sum (21.2 years), rolling CAGR across 4 windows, rolling volatility across 4 windows, and rolling SIP XIRR across 4 windows, here is the honest summary of what the long-term data says — and where I land.
To be clear about methodology — I am basing my views on the longest available data: the 21.2-year lump sum, 10-year rolling CAGR (2,775 windows), and 10-year rolling SIP XIRR (135 windows). Short windows (1Y, 3Y, even 5Y) are shown for completeness but are NOT the basis for the verdict.
If you look ONLY at backtested returns over long horizons, the ordering is clear:
Pure returns would tell you to pick NLM 250 first, Multicap second, Nifty 500 last. The headline gap is ~1.5pp CAGR.
But pure backtested CAGR is not how real investors actually experience an index fund. Three real-world factors meaningfully change this picture — and they are why my final ordering puts Nifty 500 first.
Backtested CAGR is gross of all real-world costs. Index funds add expense ratios, tracking error, and impact costs on top. Nifty 500 index funds have the largest AUM, the most competition, the lowest expense ratios (~0.20%), and the lowest tracking error because their underlying stocks are highly liquid.
NLM 250 and Multicap 50:25:25 funds are newer, fewer, and charge higher expense ratios (~0.30–0.45%). More importantly, their quarterly rebalancing forces transactions in less liquid mid and small cap stocks every quarter, which creates real impact costs. The live CAGR gap between Nifty 500 and the tilted indices is probably 0.8–1.0pp, not the 1.5pp the backtested data suggests. Still real, but smaller.
Nifty 500’s worst drawdown was -63.7%. NLM 250 was -67.6%. Multicap 50:25:25 was -66.8%. On paper, that 4 percentage point difference looks small. In practice, it is the difference between “painful but holdable” and “I cannot take any more” for many investors.
At -64%, your Rs.1 crore portfolio is worth Rs.36 lakh. At -67%, it is worth Rs.33 lakh. That extra Rs.3 lakh of paper loss at the absolute trough is often where investors capitulate and sell. The best index is the one you can hold through the worst phase without panicking. Nifty 500 is structurally the easiest to hold.
Nifty 500 is the only one of the three that is a true market-cap weighted index. When a company grows, its weight goes up. When it shrinks, its weight goes down. This is how markets are supposed to work. There is no human-imposed allocation rule.
NLM 250 forces 50% mid cap. Multicap 50:25:25 forces 25% small cap. Why exactly 50%? Why exactly 25%? The answer is — these are arbitrary numbers chosen by the index designers. There is no investment thesis behind “50% large + 50% mid” or “50:25:25”. They are clever rules, not investment principles. Nifty 500 needs no defense; the other two need to justify their allocation rules every time you explain them.
Nifty 500 automatically up-weights winners and down-weights losers through market action. No quarterly forced rebalancing. When a small cap doubles in value, it just becomes a slightly bigger small cap in Nifty 500 — no forced selling. Tilted indices force you to trim winners and add to losers every quarter. This sometimes captures rebounds (2009) and sometimes traps you in falling segments (2018–2020 small caps).
Let me be honest about the cost. By picking Nifty 500 over NLM 250, you are likely giving up roughly 1 percentage point of CAGR per year (after real-world costs). Over 25 years of a typical SIP corpus, that compounds to a meaningful amount.
On a Rs.5 lakh annual SIP for 25 years, the difference between 13.5% and 14.5% live CAGR is roughly Rs.65 lakh on a total corpus of Rs.7 crore. That is real money. You are paying that price for implementation cleanliness, behavioural comfort, and structural simplicity. Whether the trade-off is worth it depends on your conviction, your discipline, and how much complexity you are willing to live with.
If you have decided to go beyond Nifty 500 for higher returns, NLM 250 is the better second choice than Multicap 50:25:25. Here is why.
Look at the head-to-head — 21Y CAGR (15.55% vs 15.50%), 10Y mean CAGR (14.50% vs 14.15%), 10Y floor CAGR (6.4% vs 5.5%), 10Y mean SIP XIRR (15.3% vs 14.8%), 10Y floor SIP XIRR (5.2% vs 3.7%). NLM 250 wins on every long-window metric. The gap is small but consistent.
NLM 250 holds only the top 250 stocks (Nifty 100 + Nifty Midcap 150). These are the most liquid mid-cap names in India. Multicap 50:25:25’s 25% small cap allocation creates higher impact costs and tracking issues in real index funds. NLM 250 funds will likely track their benchmark more cleanly in practice.
In 2018–2020, small caps went through a 2+ year bear market. Multicap 50:25:25 suffered a -41.7% drawdown over 790 days because of its 25% forced small cap weight. NLM 250’s worst non-2008 drawdown was -37.8% over 59 days (COVID only). NLM 250’s structure naturally avoids extended small cap underperformance because it has zero small cap weight.
NLM 250 has one rule — 50:50 between large and mid cap. Multicap 50:25:25 has two rules — 50% large, 25% mid, 25% small. Fewer rules means less to defend intellectually, and slightly lower implementation friction.
Multicap 50:25:25 is essentially tied with NLM 250 on returns but loses on most other metrics. Here is why I rank it last.
It is close — but consistently behind. 21Y CAGR by 5bps, 10Y mean CAGR by 35bps, 10Y floor CAGR by 90bps, 10Y SIP XIRR mean by 50bps, 10Y SIP XIRR floor by 150bps. None of these gaps is huge, but they all favour NLM 250.
The -41.7% drawdown over 790 days in 2018–2020 is the structural cost of forced small cap exposure during a multi-year small cap bear market. This is not a tail event — small caps go through extended underperformance cycles regularly. Multicap 50:25:25 cannot escape them structurally.
Yes — Multicap 50:25:25 recovered from the 2008 GFC in 1.6 years vs 5+ years for the others. The quarterly rebalancing caught the sharp 2009-10 small cap rebound. But this was a specific V-shape recovery. The 2018–2020 cycle was the opposite — a long grinding small cap bear where the rebalancing kept you stuck in falling stocks. The recovery advantage is not a structural feature you can count on.
The 25% small cap allocation in Multicap 50:25:25 creates the most tracking error and impact cost of the three indices. Small cap stocks are the least liquid, and quarterly forced rebalancing in them is the most expensive transaction. Real index fund returns will lag the backtested numbers more here than in either of the other two indices.
Three indices, 21 years of data. Here are the three findings that matter most:
My recommendation order, weighing returns AND implementation AND behaviour AND structural defensibility:
| Rank | Index | Why |
| 1 | Nifty 500 Index Fund | True market-cap weighted, lowest cost, shallowest drawdown, easiest to hold |
| 2 | Nifty LargeMidcap 250 Index Fund | If you want more aggression — beats Multicap 50:25:25 on every long-window metric |
| 3 | Nifty 500 Multicap 50:25:25 Index Fund | Only if you specifically want forced 25% small cap exposure |
Honest disclosure about the cost. By picking Nifty 500 over the tilted indices, you are giving up roughly 1 percentage point of live CAGR per year (after costs). On a Rs.5 lakh annual SIP over 25 years, that compounds to roughly Rs.65 lakh on a total corpus of about Rs.7 crore. That is real money.
So why still pick Nifty 500 first? Three reasons that together justify the trade.
If you have decided you want more equity risk than Nifty 500, then NLM 250 over Multicap 50:25:25. NLM 250 beats Multicap on every long-window return metric (mean and floor), has more liquid underlying stocks (only top 250), and avoids the prolonged small cap pain cycles that hit Multicap in 2018–2020.
Multicap 50:25:25 is the right index only if you specifically want forced 25% small cap exposure and believe small caps will be a major part of India’s growth story. That is a legitimate active view — but it is an active view, not a default.
The data shows that all three indices turned Rs.1 lakh into Rs.16–21 lakhs over 21 years. The choice between them changes the outcome by a few lakhs. But the choice to actually stay invested through every crash decides whether you participate at all.
An investor who sold during the 2008 crash at -67% on NLM 250 turned a paper loss into a permanent one. An investor in Multicap 50:25:25 who panicked during the 2018–2020 grind ended up missing the 2020–2024 mid and small cap super-rally that followed. The index did not lose them money. Their behaviour did.
The best index for you is not the one with the highest back tested CAGR — it is the one you will actually HOLD during the next major crash without selling. This is the deepest reason why Nifty 500 is my top pick. Not because it has the highest backtested return — it does not. But because it is the easiest to hold when the next 2008 happens.
If you are absolutely confident you can hold through a -67% drawdown without selling — and you believe in the structural premium of tilted indices — then NLM 250 is a reasonable choice with ~1pp higher live CAGR. But honestly assess your behavioural temperament first. Most retail investors overestimate their ability to hold through severe drawdowns.
Time in market > timing the market > index selection > everything else. The 21-year data spanning two major crashes is unambiguous on this.
Pick the index you can hold. Hold it through everything. The rest takes care of itself.
Stop chasing just returns. There are many hidden harsh realities which 99% investors ignore. In…
Someone recently shared a post in a personal finance group that went something like this:…
EGR — real gold, no locker, no purity worries, physical delivery anytime. Yet 99% of…
India’s 65-year-old tax law is gone. The new Income Tax Act 2025 is live from…
Do you know how Gold & Silver ETF and Mutual Fund NAV is valued daily?…
Between the Nifty 50 Vs Nifty 500 Index Fund, which one do you have to…