What is NIFTY Midcap 150? How to invest in NIFTY Midcap 150 Index?

Every investor is focused on two major financial goals – wealth accumulation and wealth preservation. While the first requires you to invest in assets which depict a robust growth in value, the second goal is focused on mitigating risk in an attempt to limit the potential downside. If you are looking for an optimal combination of the two, then passive investing in the Nifty Midcap 150 Index may be a good option for you. The Nifty 50 Index equity funds invest in the 50 large companies with a market capitalisation of over INR 20,000 crores, and while these stocks are considered relatively safe, they have limited potential for growth since they are large, mature companies. On the other hand, small cap passive equity funds invest in companies with a market capitalisation below INR 5000 crores, a space filled with robust potential but also marred by high volatility and risk. In this scenario, the Nifty Midcap 150 Index fund, which falls in the middle, acts as a sweet spot for investors keen on calibrated growth and optimal risk management. 

What is NIFTY Midcap 150?

Mutual funds which invest in the Nifty 150 Midcap index are considered relatively safer than the funds investing in the small cap index, and more potent than the large cap index funds. The Nifty Midcap 150 consists of the 150 stocks which fall below the large cap category and have a market capitalisation between INR 5000 crores and INR 20,000 crores. This wide categorisation offers the Nifty Midcap index strong growth potential as well as mitigated risk, making it an attractive proposition for you if you are keen on the dual goals of wealth accumulation and preservation. 

Weightage aspects to consider

The weightage of a company or sector, on the Nifty Midcap index, refers to the percentage of the index’s composition that it commands. While the weightage of a company is aligned with its free-float market capitalisation, the weightage of a sector depends on the free-float market cap of its constituent companies, with regards to the underlying index. So how do we calculate the free-float market cap of companies constituting the index? You can calculate the number by multiplying the underlying company’s stock price with the total number of shares that are available in the market. For instance, let us consider company X, which has a total of 1 lakh shares readily available in the market. Company X’s share price, at present, stands at INR 500 per share. In this scenario, company X has a market capitalisation of INR 5 crores, i.e., INR 500 x 1 lakh shares.

Therefore, while the Nifty Midcap 150 index consists of the 150 companies which are ranked 101 to 250 on the Nifty 500 index, a specific company’s weightage on the benchmark is decided by its free-float market cap. This means that companies with a larger free-float market cap would enjoy a higher weightage on the index. For instance, Pfizer has a market cap of INR 17,643 crores [1] at present, and Alkyl Amines comes in at INR 13,639 crores [2]. In this scenario, Pfizer enjoys a higher weightage on the index compared to the latter.

[1] https://www.moneyworks4me.com/nse-index/top-nse-midcap-150-companies-list

[2] https://www.moneyworks4me.com/nse-index/top-nse-midcap-150-companies-list

Sector-based weightage

Given that the weightage of sectors is decided by the weightage of its constituent companies, the Nifty 150 Midcap index leans significantly towards major sectors such as consumer goods, financial services, and industrial manufacturing. According to recent reports, the weightage of sectors, on the index, is as follows:

The financial services sector leads with 16.3%, followed by capital goods at 12.51%, healthcare at 9.89%, chemicals at 7.97%, information technology at 7.41% and oil, gas, and consumable fuels at 7.22%. Further, the automobile and auto components sector has a weightage of 6.8%, consumer durables is at 6.5%, consumer services at 4.75%, power at 3.86%, realty at 3.24%, and fast moving consumer goods at 2.42%. The last few sectors, with the lowest weightage, are metals and mining at 2.28%, construction materials at 1.98%, textiles at 1.82%, media, entertainment, and publication at 1.77%, telecommunication at 1.72%, services at 1.26%, and diversified sectors at 0.31%.[3] It is important to note that these percentages are fluid, given the continuous changes in the free-float market cap of companies.

Performance of Nifty Midcap 150

Index funds are expected to offer returns which are in line with the growth of the market. Over the last decade and a half, the index has offered average annual returns of 16.5%, and, in the last three years, the index has offered 22% returns, as against the 16% offered by the Nifty 50 index [4].

How can you invest?

The Nifty 150 Midcap index fund is an excellent and convenient way to invest in this robust benchmark and participate in its growth. You can simply choose your scheme from the index funds and Exchange Traded Funds (ETFs) offered by asset management companies or investment platforms and pick one which indicates the least tracking error and low expenses.

Investing in the Nifty 150 Midcap index is a great option for passive investors keen on accumulating wealth while also undertaking mitigated risk.

[3] https://www.etmoney.com/learn/mutual-funds/what-is-nifty-midcap-150-how-can-you-invest-in-nifty-midcap-150/

[4] https://www.etmoney.com/learn/mutual-funds/what-is-nifty-midcap-150-how-can-you-invest-in-nifty-midcap-150/

 An investor education initiative by Edelweiss Mutual Fund

All Mutual Fund Investors have to go through a onetime KYC process. Investor should deal only with Registered Mutual Fund (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit - https://www.edelweissmf.com/kyc-norms  

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME