That is very common. When we dial in a barrel for threading, chambering, crowning , or like work, we start with a .001 indicator to rough it in, switching to a .0005 to get what looks like dead on. Once it looks dead on with the .0005 indicator we go to a .0001 indicator to get it right.
Even with it not moving the .0005 indicator, it will still swing a good bit with the .0001 indicator.
A good .0001 indicator is just more sensitive.