What is NIFTY Midcap 150 and how do you invest in it?

The world of investing can seem complex and confusing, especially if you're just starting out. Very often, it is difficult to decide where to begin one’s investment journey. A popular and exciting way to enter the world of mutual funds is through the NIFTY Midcap 150 index. If you've never heard of it, or if you’re not sure how to get started with it, this article will help you with that. We’ll take a closer look at the NIFTY Midcap 150, explaining it in simple terms, so that you can decide whether it is the right investment choice for you.

• Table of contents

1. What is NIFTY Midcap 150?
2. Why is it called ‘NIFTY’?
3. Weightage of different companies and sectors in NIFTY Midcap 150
4. Weightage of companies
5. Weightage of sectors
6. How to invest in the NIFTY Midcap 150 index
7. Key benefits of NIFTY Midcap 150 funds

What is NIFTY Midcap 150?

Let’s start by understanding what the NIFTY Midcap 150 actually is. The NIFTY Midcap 150 is an index that tracks the performance of 150 companies listed on the stock market. These companies fall into the ‘midcap’ category, which means they are medium-sized businesses. They’re not as large as the biggest companies (large caps) but are bigger than the smallest companies (small caps).

These midcap companies are often at a stage where they are growing and expanding. This makes them exciting because they have the potential to become large companies in the future, but they also come with more risk compared to large, well-established companies. So, when you invest in the NIFTY Midcap 150, you’re essentially investing in a basket of these 150 mid-sized companies.

Why is it called ‘NIFTY’?

The term NIFTY is a combination of the words ‘National Stock Exchange’ (NSE) and ‘fifty’ (from the NIFTY 50 index, which represents the 50 largest companies). The NIFTY Midcap 150 is part of the broader family of NIFTY indices, but it focuses specifically on midcap companies.

Weightage of different companies and sectors in NIFTY Midcap 150

Let’s look at how the NIFTY Midcap 150 is structured in terms of weightage. The index doesn’t just include any random 150 companies. The companies are selected based on their size (market capitalisation) and how much they contribute to the overall economy.

Weightage of companies

• Top 10 companies: These usually have a higher weightage in the index because they are bigger and relatively stable.
• Next 40 companies: These have a moderate weightage.
• Remaining 100 companies: These have a lower weightage but still play an important role in the index.

Weightage of sectors

Similarly, different sectors (like finance, technology, healthcare, etc.) are represented in the NIFTY Midcap 150. The index tries to balance these sectors to avoid being too dependent on any one industry. For example:

• Financial services: This usually has the highest weightage in the NIFTY Midcap 150 because it’s a critical part of the economy. This sector includes banks, insurance companies, and financial institutions that drive economic activities. The stability and growth in financial services are crucial for the overall health of the economy, making it a dominant sector in the index.
• Industrials and consumer goods:This comes next, with a significant share in the index. The industrial sector includes companies involved in manufacturing and infrastructure, which are key drivers of economic growth. The consumer goods sector reflects consumer spending habits, and as incomes rise, demand for these goods typically increases, contributing to steady growth.
• Healthcare and technology: These sectors might have a smaller share in the NIFTY Midcap 150, but they offer substantial growth potential. The healthcare sector benefits from rising demand for medical services and innovation in treatments. The technology sector is driven by rapid advancements and the increasing reliance on digital solutions, making it a key area for future growth.

Understanding the weightage helps you see where your money is going when you invest in this index. It also helps you understand how different economic sectors might affect your investment.

How to invest in the NIFTY Midcap 150 index

Now that you know what the NIFTY Midcap 150 is, let’s talk about how you can invest in it. There are a few ways to do this, and we’ll go through them one by one.

Investing through index funds

An index fund is a type of mutual fund that attempts to mirror the performance of a specific index, like the NIFTY Midcap 150. When you invest in an index fund based on the NIFTY Midcap 150, the fund manager buys the stocks of all the companies listed in the index, in the same proportions as the index.

How to invest:

• You can invest in these funds through your bank, a distributor, or an online investment platform.
• You can start with a lumpsum or set up a Systematic Investment Plan (SIP) to invest a small amount every month. A MF SIP calculator can help you determine a suitable investment amount by helping you estimate the potential returns.

Investing through Exchange-Traded Funds (ETFs)

Exchange-Traded Funds (ETFs) are similar to index funds but trade like stocks on the stock exchange. When you buy units of a NIFTY Midcap 150 ETF, you are indirectly buying all the stocks in the index.

• You require a demat and trading account to purchase ETFs.
• You can buy and sell ETFs just like you would buy and sell any other stock.

Directly buying stocks

If you’re a more experienced investor or want to take on more risk, you could also buy stocks directly from the companies listed in the NIFTY Midcap 150. However, this requires more research and attention because you’ll need to decide which companies to invest in, and when to buy or sell their stocks.

How to invest

• Research and select companies from the NIFTY Midcap 150.
• Buy their stocks through your trading account.

Key benefits of NIFTY Midcap 150 funds

Investing in the NIFTY Midcap 150 offers several benefits that can make it an attractive option for investors looking to grow their wealth. Let’s take a look at these benefits in more detail.

1. Potential for long-term growth: Midcap companies are generally in the growth phase, which means they have the potential to offer higher returns compared to large-cap companies. If these companies grow as expected, your investment could grow significantly over time. Midcap stocks can experience substantial price appreciation as these companies expand and capture more market share.
2. Diversification: By investing in the NIFTY Midcap 150, you’re not putting all your eggs in one basket. Your investment is spread across 150 companies in different sectors, which reduces your risk. Even if one company doesn’t perform well, others in the index might do better and balance out your investment, providing a smoother investment experience.
3. Access to a wide range of industries: The NIFTY Midcap 150 covers a variety of sectors like finance, healthcare, technology, and more. This gives you exposure to different parts of the economy, which can be beneficial if one sector is performing better than others. This broad exposure can help capture growth across various segments of the economy.
4. Illustrative returns: Historical data shows that midcap indices like the NIFTY Midcap 150 have delivered impressive returns over the long run, often outperforming large-cap indices. While past performance doesn’t guarantee future results, it provides an illustration of the kind of returns investors might expect by staying invested for an extended period.
5. Easier to manage: Investing in a NIFTY Midcap 150 fund or ETF is easier to manage compared to buying individual stocks. You don’t need to constantly monitor the market or make decisions about when to buy or sell. The fund or ETF automatically adjusts to reflect the index, making it a hassle-free investment option.

Conclusion

Investing in the NIFTY Midcap 150 can be considered to grow your money over time. It offers a good balance of risk and reward, making it an attractive option for many investors. By choosing to invest in this index through mutual funds, ETFs, or even directly buying stocks, you can benefit from the growth of these midcap companies while spreading your risk across a variety of industries. Whether you’re just starting out or looking to diversify your portfolio, the NIFTY Midcap 150 gives you access to the growth potential of mid-sized companies in a simple and straightforward way. As with any investment, it’s important to do your research and consider your financial goals and risk tolerance before making a decision.

FAQs

What makes mid cap funds better than large cap funds?

Mid cap funds often have higher growth potential because mid-sized companies are typically in the growth phase, whereas large-cap companies are more established and might grow more slowly. However, midcap funds also come with more risk. Investors must seek the help of a financial advisor when choosing between large and mid cap funds.

Is it good to invest in NIFTY Midcap 150?

Yes, investing in the NIFTY Midcap 150 can be a good choice if you’re looking for higher long term growth and are willing to take on more risk compared to investing in large-cap funds.

What is the difference between NIFTY 100 and NIFTY Midcap 150?

The NIFTY 100 includes the top 100 large companies listed on the NSE, focusing on established businesses. The NIFTY Midcap 150, on the other hand, includes 150 mid-sized companies, which are typically in the growth phase.

What is the meaning of the NIFTY midcap index?

The NIFTY Midcap Index refers to a stock market index that tracks the performance of mid-sized companies listed on the NSE, offering a snapshot of the midcap segment of the market.

How to Invest in Nifty Midcap 150 Index Fund Direct Growth?

To invest in the Nifty Midcap 150 Index Fund Direct Growth, you need to first identify an Asset Management Company (AMC) that offers the fund. Assess the investment strategies, fund manager’s track records and performance data (if the fund has been operational for more than a year) across AMCs to choose. You can either invest directly through the AMC or through a registered mutual fund distributor. You can also invest through registered aggregator platforms.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views / opinions or as an investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.