NIFTY MIDCAP

What is the Nifty Midcap Index?

The Nifty Midcap Index is a broad market index that tracks the performance of the top midcap companies listed on the National Stock Exchange of India. This Index provides an overview of the performance and sentiment of the midcap segment of the stock market over a specific time frame. The NSE Indices Limited, previously known as (India Index Services and Products Limited) owns and operates the Nifty Midcap Index under the Nifty brand name for the National Stock Exchange (NSE).

The Nifty Midcap Index is also used to benchmark fund portfolios and develop index and Exchange Traded Funds (ETFs). By using this index, fund managers are able to form dedicated investment vehicles that replicate the index’s performance and let investors generate substantial returns with limited capital.

• The Nifty Midcap Index tracks the behaviour and performance of NSE-listed Midcap companies.
• The index is operated and managed by NSE Indices Limited, previously known as (India Index Service and Product Limited).
• The Nifty Midcap Index is also used to benchmark portfolios and construct index funds and ETFs.

Types of Midcap Indices

The midcap index is an umbrella term that includes all the midcap indexes introduced by India's National Stock Exchange. There are four types of Nifty Midcap Indices:

1. Nifty Midcap 50 - The index includes 50 midcap stocks from the Nifty 150 index with a market capitalisation ranging from Rs 5,000 to Rs 20,000 crores. These stocks are ranked between the largecap and the smallcap stocks from 101 to 250 on the stock market. As of 29th September 2023, the Nifty Midcap 50 index represents about 7% of the free float market capitalisation of the stocks listed on the NSE.
2. Nifty Midcap 100 - Similar to the Nifty Midcap 50, this index also represents the movement and overall sentiment of the midcap segment. Nifty Midcap 100 evaluates the performance of the top 100 midcap stocks from the Nifty Midcap 150 index. It also represents about 13% of the free float market capitalisation of the stocks listed on the NSE.
3. Nifty Midcap 150 - The Nifty Midcap 150 is broader than all the midcap indexes because its constituents include all the 150 midcap companies ranked from 101 to 250. This index provides the true picture of the behaviour and health of the midcap segment. The Nifty Midcap 150 index represents about 16% of the free float market capitalisation of the stocks listed on the NSE.
4. Nifty Midcap Select - The Nifty Midcap Select index is a unique index that tracks a cluster of 25 liquid stocks that are chosen from the NIfty Midcap 150 index based on the full market cap, average daily turnover and availability for trading in the F&O segment.

How Is The Nifty Midcap Index Calculated?

The Nifty Midcap Index is constituted based on the free float market capitalisation method, where the value of the index represents the aggregate free float market cap of all the stocks included in the index. To ensure that this index reflects the true and real-time sentiment and health of the midcap segment, NSE Indices Limited ensure that the index value is calculated with utmost precision and accuracy.

The Nifty Midcap Indexes are constituted based on the free float market capitalisation method, where the index value represents the aggregate free float market cap of all the index constituents relative to the base index value and base market cap.

The formula for calculating Nifty midcap Indexes is:

Index value = Free float market cap / (base market cap * base market index)

Additionally, besides calculating the right value of the index, NSE indices also ensure that the value of the index is maintained throughout; they review the index semi-annually on 31st January and 31st July every year. After the review, NSE Indices Limited makes necessary changes in the composition of the included in the index are removed, or new ones are added as per the pre-decided eligibility.

• The Nifty Midcap Index is calculated using the free float market capitalisation method.
• The index is reviewed semiannually on 31st January and 31st July.
• The index value represents the aggregate free float market cap of the index constituents relative to the base index and base market value.

What are midcap stocks?

Midcap stocks refer to a category of equity securities that have a market capitalisation between Rs 5,000 and 20,000 crores. These stocks are ranked from 101 to 250 on the Nifty Index as per their full market capitalisation. Midcap stocks represent those listed companies that have moderate risk profiles and have the attributes of both large and small cap stocks.

When a small cap company (market cap lower than 5000 crores) performs well, and investors invest in the stocks of these companies, it results in increased market capitalisation value. A gradual increase in the market cap of small cap stocks leads to their promotion to the mid cap segment. Thus, many investors prefer to invest in mid cap stocks because they offer a balanced investment opportunity.

• Midcap stocks have a market cap from Rs 5,000 to Rs 20,000 crores.
• These stocks are ranked from 101 to 250 on the National Stock Exchange (NSE).

Advantages of the Nifty Midcap Index

Investors choose to invest in the Nifty Midcap Index for the following reasons:

1. Diversity - The Nifty Midcap Index offers diversification benefits to investors because by parking their funds in the market index through distinct index funds and ETFs, investors can generate risk-adjusted returns in the long term.
2. Benchmarking tool - The performance of the Midcap Index is used by various mutual fund companies and other institutions to benchmark the performance of their own funds.
3. Midcap segment representation - Indian stock exchanges have thousands of listed stocks to choose from.  However, it also leads to increased challenges for investors in tracking the performance of various targeted stocks. Therefore, market indices such as the Nifty Midcap Index help them to track the performance of a particular market segment and stocks.
4. Moderate Risk - Since the Nifty Midcap Index evaluates the midcap segment of the market, it offers substantial returns to investors with limited risk.

How can you invest in the Nifty Midcap indexes?

Because Nifty Midcap indices such as Nifty Midcap 50 and Nifty Midcap 100 are market indexes therefore, you can not invest in them directly. However, you can access other methods of investment to invest in the Nifty Midcap Indexes, such as:

1. Direct investment in the Nifty Midcap stocks: This method includes creating a portfolio by manually investing in the stocks that form the constituents of the  Nifty Midcap indices. However, this method requires an immense amount of capital and skill in order to manually construct and replicate the Nifty Midcap Index while maintaining it constantly during the investment period.
2. Index funds or Exchange Traded Funds (ETFs): Index funds and Exchange Traded Funds (ETFs) are both investment vehicles that track the movement and behaviour of a market index. These funds are managed by experienced fund managers who are responsible for maintaining them, so these funds are able to offer returns similar to that of the underlying index. You can invest in ETFs and index funds with limited capital and can generate returns that are similar to Nifty Midcap indices without experiencing high volatility risk.

Top 5 Stocks Of The Nifty Midcap Indexes By Weightage

• Nifty Midcap 50 Index

1. Suzlon Energy Limited (SEL) - Suzlon Energy Limited was incorporated on 10th April 1995 and commenced its operations with a wind farm project in Gujrat. SEL today stands as the largest renewable energy solution and has a presence in 17 countries. The core business of Suzlon Energy Limited (SEL) involves designing, manufacturing, and supplying wind turbine generators (WTGs).
2. Max Healthcare Institute Ltd. - Max Healthcare Institute Limited was incorporated on 18th June 2001 as a private limited company. It was originally named “Infinitium Technologies Private Limited”, which was later changed to “Max Healthcare Institute Private Limited” on 28th June 2002. It is one of the largest healthcare companies in India, and it provides healthcare facilities through a network of 5000+ beds, 30+ specialities, and 5000+ clinics across the nation.
3. Indian Hotels Co. Ltd. - The Indian Hotel Company Limited is a well-known hospitality brand of the TATA Group. It is known for providing state-of-the-art hospitality infrastructure to its customers both domestically and internationally. Brands like Taj Hotels, Seleqtins, Vivanta, Ginger, Tree of Life, ama Stays & Trails, Qmin, and Taj Sats are key constituents of its business portfolio.
4. Persistent Systems Ltd. - Persistent Systems Limited is a company that offers software development services and maintains software solutions for its clients. It was incorporated as a private limited company on 30th May 1990 and was converted into a public limited company on 17th September 2007. The customers of persistent systems include companies which develop and deploy software products and provide them with a competitive advantage through their tech services.
5. PB Fintech Ltd. - Pb Fintech Limited, or Policy Bazar Limited, is India’s largest online distributor of insurance and lending products. PB Fintech Limited owns various sub-brands such as Policty Bazar.com, Paisa Bazar, PB partners, Doc Prime and Money Wide. The core strength of PB Fintech Limited is its wide range of offerings through transparent and tech-enabled platforms.

• Nifty Midcap 100 Index

Since the Nifty Midcap 100 includes all the stocks of the Nifty 50 index, we will consider only those not included in the above list.

1. BSE Limited - The Bombay Stock Exchange (BSE) is the first and the fastest stock exchange in Asia, and it is housed in Mumbai, India’s financial capital. It was primarily established as ‘The Native Share & Stock Brokers Association’ by a cotton merchant, Premchand Roychand, in 1875.

• Nifty Midcap 150 Index & Nifty Midcap Select Index

The top 5 stocks of the Nifty Midcap 150 index and Nifty Midcap Select Index are the same as those of the Nifty Midcap 50 index, except PB fintech does not form the top 5 constituent of these indexes. It is ranked 6th in the Nifty Midcap 150 index.