Why NIFTY Midcap 50 Index is Essential for Investors?

Market indices are essential in today’s complex investment landscape. We might fail to gauge the performance of stock market, specific industries, and sectors without market indices. NIFTY Midcap 50 is one of the essential indices for investors in India. Investors interested in mid-cap public companies can use this index to make informed decisions. Let us discuss the midcap index in detail.

What is NIFTY Midcap 50?

NIFTY Midcap 50 is a market index representing the performance of the midcap segment in India. Midcap companies in India have a market capitalisation between 5,000 and 20,000 crores. You can analyse the performance of the entire midcap segment in India by viewing the NIFTY value. The constituents of the NIFTY Midcap 50 are selected from the NIFTY 150 Midcap index. The NIFTY Midcap 150 can be considered a superset of the NIFTY Midcap 50 index. However, both are required by investors to make informed decisions.

Similar to other NIFTY indices, the NIFTY Midcap 50 is also managed by the National Stock Exchange (NSE). The index represents around 6% of the total free-float market cap of stocks listed on the NSE. Since the NIFTY Midcap 50 is managed by the NSE, it only includes stocks listed on the National Stock Exchange. Investors rely on the NIFTY Midcap 50 to make informed decisions, perform benchmarking, and other purposes. Financial institutions in India also use this index to create better investment products for their customers.

NIFTY Midcap 50 Methodology

The methodology behind the NIFTY Midcap 50 is based on the free-float factor. The market cap of a company does not show the full picture to an investor. The total market cap of a company is based on the total number of shares. The market cap of a company includes stocks held by promoters and insiders. These shares are not traded on the NSE. Because of this, the NIFTY Midcap 50 uses the free-float market cap for index calculation.

The free-float market cap does not include shares that are held by promoters and insiders. It only includes stocks that are available for trading on stock exchanges. Each constituent in the NIFTY Midcap 50 has a predetermined weight. Based on its weightage, each constituent contributes to the overall value of the index. Investors do not have to waste time in the calculation part, as they can view the final value and make decisions.

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Factors Affecting NIFTY Midcap 50

A range of factors can impact the performance of the NIFTY Midcap 50 index. Here are some factors impacting this.

  • The monetary policies of the government can leave an impact on the stock performance of midcap companies, thus impacting this value.
  • The interest rates in the market can impact lending rates. Increased lending rates can cut a company’s access to funds. As a result, the stock performance might decline, thus impacting the index value.
  • The stability of the current government also impacts the performance of midcap companies in the country. Political instability will never lead to a good business environment.
  • Inflation, gold prices, and GDP have an impact on the index performance. Internal factors within companies will also affect the performance of the NIFTY 50 Midcap index.

Eligibility Criteria for Selection of Stocks

There are numerous midcap companies in India, but only the top 50 are selected for the index. The NIFTY 50 Midcap index has certain conditions for the selection of constituents, which are as follows:

  • Stocks that are part of the NIFTY Midcap 150 are only chosen for the NIFTY
  • Futures & Options (F&O) constituents of the NIFTY Midcap 150 are considered for the NIFTY 50 Midcap index. When the market cap (not free-float market cap) of a constituent in the NIFTY Midcap 150 is twice that of the last participant in the NIFTY Midcap 50, it is automatically included.
  • Mid-cap companies included in the NIFTY Midcap 50 must have a market cap between INR 5,000 and 20,000 crores.
  • Data from the past three months is considered for stocks of newly listed companies on the NSE. For other stocks, the past six months’ data is considered for selection in the index.
  • Midcap companies with the top 50 free-float market caps are selected for the NIFTY Midcap.
  • Foreign companies cannot be a part of the this. Companies incorporated in India and listed on the NSE can become a part of the NIFTY Midcap 50 index.
  • The liquidity of stocks of midcap companies is also considered for selection in the NIFTY Midcap 50 index.

Nifty Midcap 50 Index Returns

NIFTY MIDCAP 50 index has shown tremendous growth over the years. One can view the NIFTY MIDCAP 50 chart to understand the return prospects. You can search for the live index chart on the website of the NSE. Trusted stockbrokers in India also allow investors to check the live index performance.

The price and total returns of NIFTY Midcap 50 have been impressive. Since its inception, It has shown price and total returns of 11.95% and 13.44%, respectively. The current five-year price and total returns of the index are 10.04% and 11.25%, respectively. It is crucial to note that these index values can change with time. You must check the live NIFTY Midcap 50 return% before making a decision.

Invest in the NIFTY Midcap 50 Index

You cannot directly invest in a market index, be it the NIFTY Midcap 50 or NIFTY Midcap 150. A market index allows you to compare your portfolio with the current market performance. Investors in the midcap segment can understand the overall market direction with the help of the this NIFTY.

You can replicate NIFTY Midcap 50 stocks in your portfolio to gain returns. However, replicating the entire NIFTY Midcap 50 index can be challenging for individual investors. For this situation, ETFs and mutual funds are available for investors in the midcap segment. These collective investment schemes can track the performance this Nifty

What is the Difference Between NIFTY Midcap 50 and Midcap 100?

Both NIFTY Midcap 50 and Midcap 100 are popular indices among investors. Here’s how both indices differ from one another:

NIFTY Midcap 50 NIFTY Midcap 100
It includes the top 50 midcap companies from the NIFTY Midcap 150 index. It includes 100 midcap companies that are also part of the NIFTY 500 index.
NIFTY Midcap 50 includes stocks belonging to around 14 different sectors. NIFTY Midcap 100 is more diverse than Midcap 50. It includes stocks of companies belonging to around 19 different sectors.
The base date for index value calculation is the 1st of January 2004. The base data for index value calculation is the 1st of April 2005.
The top contributing sectors based on weightage are financial services, consumer goods, and pharma. The top contributing sectors for this index are financial services, healthcare, and capital goods.

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Conclusion

NIFTY Midcap 50 is a reliable index that helps understand the performance of the midcap segment in India. You can invest in a mutual fund or ETF scheme that tracks the performance of the NIFTY Midcap 50 index. Many investors use this index to discover the best midcap stocks in India. You can also use the NIFTY Midcap 100 and Midcap 150 indices for further research. Check the current value of the NIFTY Midcap now!



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