What Is the Nifty Midcap Index? Beginner’s Guide to Mid-Cap Investing in India

India’s midcap companies are considered the “growth engine” of the country's economy and often outperform large-caps. Tracking the Nifty Midcap index is essential for investors to gauge the performance of the midcap segment and for diversification.

The Nifty Midcap 150 index comprises companies ranked 101st to 250th by market capitalisation across various sectors, offering investors access to high-growth potential investments.

Let’s understand in detail what the Nifty Midcap index is, how it works, and how you can invest in it.

What Is the Nifty Midcap Index and How Does it Work?

The Nifty Midcap index is a benchmark index that tracks the performance of listed midcap companies ranked 101 - 250 on NSE. The index includes companies from various sectors and assigns weights using the free-float market capitalisation method.

There are different Nifty Midcap indices compiled based on criteria such as market capitalisation, number of constituents, liquidity and financial performance.

The following are popular Nifty Midcap Indices:

Nifty Midcap 50 Index

The Nifty Midcap 50 index is a benchmark index that tracks the top 50 midcap companies by market capitalisation and liquidity, especially those with active derivative contracts, such as Futures and Options (F&O).

Investors and traders monitor and analyse the Nifty Midcap 50 index to gauge the performance of the midcap segment, and it is often used as a benchmark for Nifty Midcap index funds and ETFs.

Nifty Midcap 100 Index

The Nifty Midcap 100 index is a benchmark index that tracks the next 100 companies across sectors, ranked between 101-200 by market capitalisation, after the Nifty 50 and Nifty Next 50 index.

The 100 companies included in the index are often 50 from Nifty Midcap 50 and 50 from Nifty Midcap 150 based on the turnover. The index offers exposure to emerging companies that could potentially become large caps in future.

Nifty Midcap 150 Index

The Nifty Midcap 150 index tracks the performance of 150 midcap companies ranked from 101 to 200 by market capitalisation.

The Nifty Midcap indices are reviewed semi-annually to ensure the index reflects the true performance of the midcap segments. Underperforming companies that no longer meet the selection criteria are removed and replaced from the index.

Selection Criteria for Nifty Midcap Index

The constituent companies included in the Nifty Midcap index are selected based on the following criteria.

Listed on NSE

Since the index is dedicated to NSE stocks, only the midcap companies listed on the NSE are eligible to be included in the Nifty Midcap index.

Rank

The Nifty Midcap index consists of companies ranked 101st to 250th by market capitalisation under the Nifty Midcap 500 segment.

Liquidity & Actively Traded

Midcap companies with high liquidity and trading volume are included in the Nifty Midcap index to ensure the real market performance of the midcap segment.

How to Invest in the Nifty Midcap Index?

The Nifty Midcap index offers investors exposure to high-growth potential companies that could become large caps in the future, leading to capital appreciation in the long term. You can invest in the Nifty Midcap Index in the following ways.

Direct Investment

You can directly invest in the individual stocks of the midcap companies included in the Nifty Midcap index, but this could lead to concentration risk, which may negatively impact your portfolio if the sector faces downturns.

Index Funds

Investors seeking passive investments can invest in Nifty Midcap index funds, which replicate the index and offer similar returns. You can invest in Nifty Midcap index funds via SIPs (Systematic Investment Plans) or lumpsum amount based on your investment approach.

Exchange Traded Funds (ETFs)

ETFs are passively managed funds tracking the Nifty Midcap indices. These ETFs are listed on exchanges, offering high liquidity and easy trading.

Should a Beginner Invest in the Nifty Midcap Index?

The Nifty Midcap index can offer high growth potential but carries significant risk due to high volatility, limited liquidity, and lack of financial transparency. Beginners can invest in the Nifty Midcap index, but they are recommended to start with small investments to reduce the risk of potential losses.

Beginners are advised to start investing in the Nifty Midcap index via index funds or ETFs, as these offer SIPs that help manage volatility and can be paused or modified anytime.

FAQs

What is the Nifty Midcap Index?

The Nifty Midcap index is a benchmark index that tracks the performance of NSE-listed midcap companies ranked 101 - 250 by market capitalisation.

How does the Nifty Midcap Index work?

The Nifty Midcap 150 index tracks the performance of mid-cap companies ranked from 101st to 250th by market capitalisation. It uses the free-float market capitalisation method to weight its constituents and is rebalanced semi-annually to accurately reflect the mid-cap market segment.

How is the Nifty Midcap Index calculated?

The Nifty Midcap indices are calculated using the free-float market capitalisation method to reflect the total market value of shares available for public trading.

Index Value = Current Free Float Market Capitalisation / Base Free Float Market Capitalisation x Base Value i,e 1000.

Can beginners invest in the Nifty Midcap Index?

Yes, beginners can invest in the Nifty Midcap index, but they are advised to invest in Nifty Midcap index funds or ETFs and start with a small investment.

How can I invest in the Nifty Midcap Index?

You can invest in the Nifty Midcap index either by individually buying its constituent stocks or by purchasing index funds and ETFs.