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

We all look to invest in companies that are likely to grow rapidly. As stock prices follow the growth in a company’s earnings and profitability, companies that grow rapidly usually have the potential to multiply our investments and build enormous wealth for us. A more reasonable way to find such high-growth companies is to look in the mid-cap space, as large-cap companies are generally market leaders in their respective sectors and have comparatively less room to grow than mid-sized companies. If you look at the returns of NIFTY 50 TRI (a basket of 50 large-cap companies) and NIFTY Midcap 150 TRI (a basket of 150 mid-cap companies), over the past 3 years, Nifty Midcap 150 TRI has delivered a 22% average annual return while NIFTY 50 TRI has delivered 16%. The trend is similar in the longer term as well.

Thus, having mid-sized companies in your portfolio is a good strategy to generate healthy returns. But before you take the plunge to invest in the mid-cap space, you should understand the risk and returns associated with this segment.

This blog will help you understand the NIFTY Midcap 150 index. We will also explain how can you invest in the NIFTY Midcap 150 index and what kind of risk and return you should expect from your investments.

What Is NIFTY Midcap 150?

NIFTY Midcap 150 index consists of 150 companies (ranked 101-250) based on the full market cap from the NIFTY 500 Index.

Full market cap is the multiplication of a company’s stock price with all its shares (active shares readily available in the market and inactive shares such as those held by promoters or the government).

To further simplify, the 100 largest companies (in terms of full market cap) in the NIFTY 500 index comprise the NIFTY 100 index. And the companies ranked 101 to 250 based on full market cap comprise the NIFTY Midcap 150 index.

Now, the NIFTY Midcap 150 index is constructed in a manner that the 150 companies that comprise the index belong to different sectors and have different weights. Let’s understand that in detail.

Weightage Of Different Companies And Sectors In NIFTY Midcap 150

A company’s weightage in the NIFTY Midcap 150 index depends on its free-float market cap. The free-float market cap is calculated by multiplying a company’s stock price with the number of shares readily available in the market. For example, if a company has 1 lakh shares readily available in the market and the price per stock is Rs. 30, then the company’s market capitalization is Rs. 30 lakh.

So, note that the NIFTY Midcap 150 index includes 150 companies (ranked 101-250) based on full market capitalization from the Nifty 500 Index. But a company’s weight in the index is based on its free-float market capitalization.

As a result, companies with a higher free-float market cap have higher weightage in the index. For instance, Adani Total Gas Ltd.’s market cap was around Rs. 2.5 lakh crore as of Mar 31, 2022. So, it has a higher weight in the index than Tata Power, whose market cap was around Rs. 43,000 crores.

How To Invest In The NIFTY NIFTY Midcap 150 Index?

A simple and easy way to invest in the NIFTY Midcap 150 Index is to choose an index fund or ETF that tracks this index. However, the limitation of taking exposure directly to the NIFTY Midcap 150 index is that your gains and losses will be in line with the Next 50 index. So, your investments will go down when the index falls, and they will gain only when the index rises. So, you will never be able to outperform the index.