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Recent data from Bajaj Finserv Asset Management shows the Nifty500 Multicap 50:25:25 Index performed better than major indices like the Nifty 50 during the recent market correction. Its fixed allocation strategy—investing a set percentage across large, mid, and small-cap stocks—helped limit downside risk. This article breaks down why this structure provides stability and what it means for long-term investors.
What Happened
A recent analysis by Bajaj Finserv Asset Management has highlighted the performance of the Nifty500 Multicap 50:25:25 Index. During the market correction in 2026, this index proved to be more stable than the broader market benchmarks. As of May 29, 2026, the multicap index saw a year-to-date decline of 2.9%. In comparison, the Nifty 50 Total Returns Index (TRI) dropped by 9.6%, and the Nifty 500 TRI fell by 4.8%. This data suggests that the index was better at cushioning the impact of the market sell-off compared to the country’s primary large-cap indices.
The Math Behind The Resilience
The reason for this performance lies in the index's design. It uses a fixed allocation rule: 50% in large-cap stocks, 25% in mid-cap stocks, and 25% in small-cap stocks. This structure is rigid, meaning it does not change based on the fund manager's view of which market segment is doing well.
Because the index is forced to maintain these specific weights, it automatically practices a disciplined investment approach. When small or mid-cap stocks rise significantly, the index rebalances by selling some of those stocks (taking profit) and buying more large-caps if they have become cheaper relative to the target. This mechanical process of buying low and selling high is what helped the index maintain its balance and reduce the intensity of the decline when markets were falling.
Fixed vs. Flexible: Why Structure Matters
For investors, it is important to distinguish this from "flexicap" funds. In a flexicap strategy, the fund manager has the freedom to move money completely out of small and mid-caps if they feel the market is becoming too risky.
With a fixed multicap index, there is no such freedom. The index must stay invested in small and mid-caps at the defined 25% levels regardless of the market mood. While this structure helped the index outperform during this specific correction, it is a double-edged sword. When the market is booming, this same constraint can limit the index's ability to participate in an all-out rally if large-caps are the only ones surging.
The Risk Factor For Investors
While the index showed resilience, it is not immune to market pressure. Investors should remember that 50% of the index is still tied to mid and small-cap stocks. If those segments of the market face a deep or prolonged crash, the 50% large-cap exposure will act as a buffer, but it cannot fully stop the index from falling. The performance of this index is essentially a bet on the diversification benefit of having all three segments working together. If mid and small-caps underperform for a long time, the returns from this index may lag behind a pure large-cap index.
What Investors Should Monitor
Investors looking at multicap strategies should watch how the index behaves when the market cycle turns from negative to positive. The true test of a fixed allocation strategy is not just how well it saves capital in a downturn, but also how efficiently it captures gains when the market recovers. Additionally, while the index has shown stable returns, investor flows into these funds remain steady but lower than more popular fund categories. Keeping an eye on how these inflows change can help investors understand whether the broader market is starting to favor this disciplined approach.