What Is NIFTY Midcap 150? How Can You Invest In NIFTY Midcap 150?

For everyone involved in investments, pursuing opportunities for substantial growth remains a common choice. While large cap companies provide stability, mid cap companies often present a unique proposition by offering a greater growth potential. The NIFTY Midcap 150 index, comprising of 150 selected mid cap companies ranked 101-250 based on market capitalisation stands out for investors seeking exposure to this dynamic segment.

What is NIFTY Midcap 150?

NIFTY Midcap 150 is a group of 150 mid sized companies in India, ranked 101-250 based on their size. It shows how these companies perform in the stock market. Investing in NIFTY Midcap 150 lets you be a part of their growth, potentially offering excellent returns over time.

The NIFTY Midcap 150 index draws its components from the broader NIFTY 500 Index, targeting companies ranked 101-250 based on market capitalisation. A company's market capitalisation is a key metric calculated by multiplying its stock price by the total number of outstanding shares including both actively traded shares and those held by promoters or the government.

The NIFTY Midcap 150 index structure ensures a diverse representation of mid sized companies across various sectors, contributing to an all inclusive market view. It consists of companies assured of growth and expansion, making it an attractive investment avenue.

Weightage of different companies and sector distribution in NIFTY Midcap 150

Within NIFTY Midcap 150 index, the weightage assigned to each company is determined by its free float market capitalisation which considers only the portion of shares available for trading in the open market. Consequently, companies with higher free float market cap hold a more significant weightage in the index.

This dynamic weightage system ensures that the NIFTY Midcap 150 index provides a balanced representation of sectors, preventing over reliance on a specific industry. This diversification contributes to the resilience of the index in the face of market fluctuations.

Here’s an overview of sector wise weightage:

Note: The weightage of 150 companies in the index keeps changing as a company’s free float market cap ultimately depends on its stock price that changes everyday.

What are the returns of NIFTY Midcap 150 Index over the years?

Below are the returns of NIFTY Midcap 150 as of October 2023:

How is NIFTY Midcap 50 Calculated?

To calculate the NIFTY Midcap 50, normally the Free Float Market Capitalisation method is used. It means only the shares that are available to the public are considered, excluding those held by promoters or large institutions.

Generally, these formulas are used:

Free Float Market Capitalisation = Shares Outstanding x Price x Investible Weight Factor (IWF)

Index Value = [(Current Free Float Market Capitalisation)/(Base Free Float Market Capitalisation)] x (Base Index Value)

The index is updated in real time whenever the NSE is open, and reviewed twice a year using average six-month data. This calculation helps investors track how midcap companies are performing overall.

Factors Affecting NIFTY Midcap 50

1. Inflation

The key factor can be inflation as high inflation costs can increase the costs for midcap companies which can reduce profits, and lower the index performance.

2. Interest Rates

The interest rates also play a key role. When the interest rates rise, it makes borrowing costlier, which can in turn slow down the business growth, affecting the stock prices of midcap companies in the index.

3. Government Policies

Any changes and updates in government policy regarding taxation, spending, and other reforms can majorly impact the midcap sectors directly.

4. Global Market Trends

Economic events and trends worldwide affect foreign investments and overall market mood, which is reflected in midcap stock movement

Key benefits of NIFTY Midcap 150 funds

Long term growth

The mid cap segment is known for its market volatility, offering both challenges and opportunities for investors. Despite short term fluctuations, the NIFTY Midcap 150 has demonstrated robust long term performance, showcasing an average annual return of 16.5% over the last 15 years. This impressive track record highlights the growth potential in mid sized companies.

Illustrative returns

To provide a realistic perspective on the wealth building potential, consider the scenario of investing Rs 10,000 monthly in the NIFTY Midcap 150 for 15 years. Such investment approach could result in an accumulation of over Rs 78 lakh by March 2024. These illustrative returns are identified as wealth creation opportunities with a strategic and disciplined investment approach in mid cap indices.

What are its Features?

The key features of the NIFTY Midcap 150 Index Fund are given below:

1. These include 50 of the actively traded mid-sized companies listed on the NSE. These companies are part of the larger NIFTY 500 Index group.

2. The index is designed to represent the performance of high-growth potential midcap stocks. It reflects how mid-sized companies are doing in the market, offering investors exposure to India’s fast-growing businesses.

3. The index is reviewed twice a year and updated based on certain rules. It helps investors get a balanced mix of risk and return, as midcap stocks usually grow faster than large caps but with more market volatility.

Eligibility Criteria

Follow these key eligibility conditions:

• First, a company must be part of the NIFTY Midcap 150.

• It should also be a Futures & Options (F&O) stock and rank among the top 30 based on full market capitalisation.

• If the market cap of a stock is double that of the lowest-ranking company in the index, it can also be included. For newly listed stocks, the evaluation is done based on 3 months of data instead of 6.

Strategies for Investing in NIFTY Midcap 150

Traditional approaches

Investors often opt for direct investment in the NIFTY Midcap 150 through index funds or Exchange Traded Funds (ETFs) specifically designed to track this index. While this approach provides a straightforward entry into the mid cap segment, it has limitations. Profits and losses are tied to the performance of the NIFTY Midcap 150 index, offering limited potential for outperformance.

Genius strategy

For those seeking to surpass index like returns, an ET Money Genius membership introduces a more sophisticated approach. Genius strategies offer exposure to portfolios investing in NIFTY Midcap 150 index funds and provide diversification across various other indices and asset classes.

Dynamic asset allocation

One distinctive feature of the Genius approach lies in its dynamic asset allocation strategy. Tailored to individual investment personalities, this strategy adjusts the allocation of assets based on market conditions. The result is an investment approach that captures the market upside while providing substantial downside protection during market corrections.

How to Invest in NIFTY Midcap 50?

If you want to invest in the NIFTY Midcap 50, you can do it either by buying individual stocks from the index or go for index mutual funds that track it. ICICI Bank’s Demat and Trading Account can be helpful to carry out investments. If you are a beginner then you can go for index funds or ETFs as these are managed by exports who can spread the risk. Furthermore, you must also check the fund’s previous performances, expense ratio, and the risk levels. 

What makes Mid cap funds better than Large cap funds?

Mid cap funds offer distinct advantages over large cap funds for various reasons:

1. Diverse sector exposure: Mid cap funds generally offer a more diversified sector exposure than large cap funds. This diversification helps reduce risk by minimising the impact of underperformance in any specific sector.

2. Emphasis on domestic growth: Mid cap funds often prioritise sectors that focus on domestic growth. This strategic positioning allows investors to capitalise on India's growing economy without excessive dependence on global market trends.

Conclusion

Investing in the NIFTY Midcap 150 index unveils the growth potential of 150 mid sized companies each with the capacity to emerge as a leader in its sector. Striking a balance between convenience, simplicity and cost effectiveness, index funds and ETFs offer a straightforward entry into the dynamic mid cap segment. Whether opting for a Direct investment approach or a Genius strategy, the key lies in aligning investments with growth path of Mid cap companies.

As investors embark on this journey, it is important to recognise the potential for wealth creation and positive market returns in a well informed and disciplined investment strategy.

The NIFTY Midcap 150 index serves as a canvas for investors to paint a picture of growth and by making informed choices, investors can navigate the complex investment landscape with confidence.