A sharp uptick in the number of initial public offerings (IPOs) and investors’ insatiable appetite for midcap and smallcap stocks in recent years have pushed the share of Nifty 50 companies in the total market capitalisation of NSE-listed stocks to its lowest level in more than two decades.

Between FY21 and FY24, the share of top 50 companies’ market cap on the NSE had tumbled from 58.9% to 46.6%. The trend continued this year as well. As of August 31, Nifty companies had a share of 43.9% in the Rs 461.1-lakh crore market cap of NSE universe — the lowest in 25 years — according to data from the exchange.

While the market cap of Nifty 50 companies rose 77% in these four-and-a-half years, the growth in companies beyond them was 192%. Smaller companies got the biggest bump, the data showed. The top 100 companies by market cap on NSE are considered largecaps, the next 150 stocks (101 to 250) are midcaps, and the next 250 stocks (251-500) are smallcaps. Over 2,550 companies are listed on the NSE.

Compared to the 77% growth in the market cap of top 50 companies, the market cap of the midcap universe rose 152%, smallcap universe jumped 219%, and the 250 microcap stocks soared 334%. Even smaller companies saw a staggering 269% growth in their market cap.

Deepak Jasani, head of retail research at HDFC Securities, pointed out that the number of companies listed on the NSE has jumped by around six times in the last 25 years.

Between FY22 and FY24, 159 companies got listed on mainboard exchanges in India, raising Rs 2.28 lakh crore. The primary market has remained buzzing even in FY25, with as many as 26 companies making their debut till August.

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“Chasing of alpha by investors, increase in new smallcap and midcap funds and their AUM, and new PMS and AIF schemes floated led to this difference, especially when the rate of growth of PAT in non-Nifty 50 stocks is higher and floating stock is limited,” Jasani said.

Domestic equities have had a tremendous run from the lows of March-April of 2020 amid the COVID-19 pandemic. The broader market has persistently outperformed the largecap stocks in these years.

While some experts pointed out that historically the broader market has not had a good run for such a long time, most expect the current run to continue, albeit at a slower pace, given the stability in earnings growth and strong domestic macroeconomic fundamentals.