Nifty Midcap Select: Meaning, Features, Benefits & Investment Guide

Mid cap companies occupy the middle segment of the equity market based on market capitalisation. Under the SEBI classification framework, companies ranked from 101st to 250th by full market capitalisation are classified as mid cap companies. They are often more established than small cap companies.

The Nifty Midcap Select Index tracks a focused group of 25 stocks selected from the Nifty Midcap 150 Index. The selection methodology considers factors such as market capitalisation, trading activity and availability for trading in the NSE Futures and Options (F&O) segment. This article explains what the Nifty Midcap Select Index means, how stocks are selected for it, and what investors may consider regarding its features, potential benefits and risks.

What is the Nifty Midcap Select Index?

The Nifty Midcap Select Index is an equity index that tracks 25 selected stocks from the Nifty Midcap 150 Index. It does not represent the entire mid cap segment. The eligible stocks need to form part of, or be going to form part of, the Nifty Midcap 150 Index at the time of review and need to be available for trading on the NSE’s Futures & Options (F&O) segment.

In simple terms, liquidity refers to the ease with which a stock may be bought or sold in the market. Trading activity is one of the factors considered in selecting stocks for the Nifty Midcap Select Index. As a result, the index represents a focused portfolio of selected mid cap stocks rather than the broader Nifty Midcap 150 universe.

How does Nifty Midcap Select work?

The Nifty Midcap Select Index uses a free-float market capitalisation methodology for determining stock weights. Free-float market capitalisation broadly refers to the market value of shares available for public trading after excluding holdings that are not considered part of the investible public float under the applicable methodology.

The index-selection process has multiple stages. First, the top five eligible stocks are selected based on their six-month average full market capitalisation. For the remaining stocks, the methodology considers six-month average full market capitalisation and six-month average daily turnover.

Stocks that fall within the relevant top 50 based on these measures are then ranked using six-month average free-float market capitalisation, from which the remaining 20 stocks are selected.

The weight of each stock in the index is based on its free-float market capitalisation. The index is calculated in real time and is reconstituted semi-annually in March and September. The reviews use six-month data ending in January and July, respectively.

Features of Nifty Midcap Select

Key features of the index include:

• Concentrated set: The index includes 25 stocks selected from the Nifty Midcap 150 universe. This gives it a more concentrated composition than broader mid cap indices.
• Focuses on liquid stocks: Trading activity is one of the factors incorporated into the stock-selection methodology. This means the index gives importance to stocks that are more actively traded in the market and hence have liquidity.
• Weighted by free-float market capitalisation: The weight of each stock is based on its free-float market capitalisation. Stocks with a higher free-float market capitalisation may consequently have a higher weight in the index.
• Calculated in real time: The index value is calculated in real time during market hours, allowing its movements to be tracked during the trading day.
• Reviewed twice a year: The index is reconstituted semi-annually, with changes taking effect on the last working day of March and September. The reconstitution follows the eligibility and selection criteria specified in the index methodology.

Benefits of investing in Nifty Midcap Select

The Nifty Midcap Select Index can offer investors a way to understand and access a narrow segment of the mid cap space. Some potential benefits include:

• Exposure to select mid cap companies: The index tracks 25 stocks selected from the Nifty Midcap 150 universe, representing a focused basket within the mid cap segment.
• Rules-based stock selection: The index follows a defined methodology based on specified eligibility and selection criteria rather than discretionary stock selection. This provides a structured framework for determining index constituents.
• Reduced dependence on individual stock choices: Since the index comprises 25 stocks, its performance is not dependent on one individual company. However, its relatively concentrated composition means that movements in individual constituents may have a noticeable effect on the index.
• Transparent methodology: The index methodology specifies the eligibility, selection, weighting and reconstitution criteria. Investors may review these factors when evaluating financial products that track or reference the index.

Risks associated with Nifty Midcap Select

Like other equity indices, the Nifty Midcap Select Index is subject to market risk. Investors considering products linked to the index may evaluate the following risks before taking exposure.

• Higher volatility: Mid cap stocks may experience considerable price fluctuations than large cap stocks, especially during uncertain market conditions.
• Market risk: The index may be affected by changes in company earnings expectations, interest rates, economic conditions, liquidity conditions, valuations and overall market movements.
• Concentration risk: The index contains only 25 stocks, making its composition more concentrated than broader market indices. Movements in a few constituents, particularly those with higher index weights, may have a noticeable effect on index performance.
• Sector and stock specific risk: Changes affecting a particular industry or individual company may influence the index. Company-specific factors such as financial performance, corporate actions, regulatory developments and changes in business conditions may affect constituent prices.

Who should invest in Nifty Midcap Select?

The Nifty Midcap Select Index itself is a benchmark and cannot be purchased directly. Investors considering financial products linked to the index may evaluate whether such exposure is consistent with their investment objectives, investment horizon and risk appetite.

• Investors with a long investment horizon: Mid cap stocks may experience considerable fluctuations across market cycles. Investors with a long investment horizon may have more time to remain invested through different market conditions.
• Investors with higher risk appetite: Since mid cap stocks can be highly volatile, this index may be more suitable for investors who can tolerate sharper market movements.
• Investors looking for focused mid cap exposure: It may be considered by investors who already have diversified equity exposure and want to add a focused mid cap allocation.
• Investors comfortable with index-based investing: Since the index follows a rules-based approach, it may suit investors who prefer a transparent and structured benchmark linked exposure.

Investors with a shorter investment horizon or lower tolerance for equity-market volatility may need to assess whether exposure to a concentrated mid cap index is consistent with their financial objectives and risk profile.

Ways to invest in Nifty Midcap Select

An index is a benchmark that tracks the performance of a defined basket of securities. Investors do not purchase the index itself. Instead, exposure to an index may be obtained through financial products designed to track or reference it.

The Nifty Midcap Select Index is currently an underlying index for futures and options contracts traded on the NSE. NSE lists both index futures and index options based on the Nifty Midcap Select Index. These are derivative contracts and differ from mutual funds and ETFs in their structure, risk characteristics and method of obtaining market exposure.

Derivative contracts may involve leverage, which may magnify gains or losses relative to the amount of capital deployed. The risk profile also varies between different derivative positions. For example, futures and options have different contractual features and potential loss profiles. Investors considering derivatives need to understand factors such as contract specifications, margin requirements, leverage, expiry and potential losses before trading.

Investors seeking exposure to the broader mid cap segment may evaluate mid cap mutual funds, index funds or ETFs, depending on the investment strategy and risk characteristics of the specific product. However, a product investing in or tracking the broader mid cap segment may not track the Nifty Midcap Select Index specifically.

Factors that may affect Nifty Midcap Select performance

Key factors that may affect its performance include:

• Earnings and business performance: Changes in revenue, profitability, margins, debt levels and business outlook of constituent companies may influence their share prices and, consequently, the index.
• Economic conditions: Changes in economic growth, inflation, interest rates and domestic demand may affect midcap companies across sectors.
• Sector-specific developments: Regulatory changes, commodity prices, input costs, government policies and changes in consumer demand may affect individual sectors represented in the index.
• Market liquidity and sentiment: Changes in domestic and foreign investor flows, liquidity conditions and risk perception may influence midcap share valuations.
• Valuation levels: Changes in the prices investors are willing to pay relative to company fundamentals may affect index performance.
• Index reconstitution: The Nifty Midcap Select is reconstituted semi-annually in March and September. Changes in constituents may therefore alter the index’s composition and performance characteristics.

Nifty Midcap Select vs Nifty Midcap 150

Both Nifty Midcap Select and Nifty Midcap 150 track the mid cap segment, but they do not serve the same purpose. Nifty Midcap 150 gives a broader view of mid cap companies, while Nifty Midcap Select focuses on a smaller basket of more liquid and actively traded mid cap stocks.

Conclusion

The Nifty Midcap Select Index is an equity benchmark that tracks 25 selected mid cap stocks through a defined, rules-based methodology. Its stock-selection process considers factors including market capitalisation, trading activity, free-float market capitalisation and eligibility for trading in the NSE F&O segment. The index represents a concentrated segment of the mid cap market and is subject to market risk, concentration risk, stock-specific risk and the potential for considerable price fluctuations. Investors evaluating products linked to the index may consider their investment objectives, investment horizon, risk appetite, asset allocation and the specific risks and costs of the product before making an investment decision.

FAQs

What is Nifty Midcap Select?

The Nifty Midcap Select Index is an equity index that tracks 25 selected stocks from the Nifty Midcap 150 Index. The stocks are selected using defined criteria that include market capitalisation, trading activity and availability for trading on the NSE F&O segment. The index does not represent all mid cap companies.

How does Nifty Midcap Select compare to Nifty 50?

Nifty 50 tracks 50 large cap stocks, while the Nifty Midcap Select Index tracks 25 selected mid cap stocks. The two indices therefore represent different segments of the equity market and hence differ in their risk and return characteristics.

Is Nifty Midcap Select better than small cap?

Neither index or market-cap segment is inherently more suitable for every investor. The suitability of exposure may depend on factors such as investment objectives, investment horizon, asset allocation and risk appetite.

How is Nifty Midcap Select calculated?

The Nifty Midcap Select Index is calculated using the free-float market capitalisation methodology. Its 25 constituents are selected from the Nifty Midcap 150 universe. The selection process considers six-month average full market capitalisation, six-month average daily turnover and six-month average free-float market capitalisation, along with availability for trading on the NSE F&O segment.

Can investors invest in Nifty Midcap Select through ETFs?

Investors cannot invest directly in an index. They need a financial product designed to track or reference the index to obtain exposure. The official Nifty Indices information currently lists futures and options as exchange-traded derivatives for the Nifty Midcap Select Index.

Investors looking for simpler mid cap exposure may consider broader mid cap mutual funds, index funds or ETFs, where available. However, these may not track the Nifty Midcap Select Index specifically.

How is the Nifty Midcap Select doing today?

The Nifty Midcap Select’s value changes during market hours based on movements in its constituent stocks. Investors may check the official NSE Indices portal for the latest index value and other factual updates.

What is the Nifty Midcap Select ticker symbol?

The ticker symbol used for the Nifty Midcap Select index is NIFTYMIDSELECT.

What was the opening value for Nifty Midcap Select today?

Investors may check the official NSE Indices portal for the latest index value and other factual updates.

What is the 52-week range for Nifty Midcap Select?

As index values change with market movements, investors may check the official NSE Indices portal for updated facts and figures.

How often is Nifty Midcap Select rebalanced?

The Nifty Midcap Select is rebalanced semi-annually, with changes taking effect on the last working day of March and September.

Is Nifty Midcap Select a mutual fund?

No. The Nifty Midcap Select is an equity market index not a mutual fund. Mutual fund schemes may use such indices as benchmarks, but the index itself is not an investment scheme.