NIFTY Midcap 100 Index – With Strong Fundamentals Comes A Strong Performance

By: Tavaga Research

Among the leading NIFTY indices, NIFTY Midcap 100 index has been growing consistently over the years. It is a representation of 9.9% of the market capitalization of the stocks listed on the NSE and the index essentially measures the performance of the top 100 NIFTY Mid-cap stocks trading on the exchange. Mid-cap stocks can be associated with stocks of those companies that have a market capitalization of between Rs. 5,000 to Rs. 20,000 crores.

Nifty Midcap 100 NSE

The NIFTY Midcap 100 index was launched on 18th July 2005. NIFTY Midcap 100 means that the index contains all the constituents from the NIFTY Midcap 50 index. The remaining 50 constituents are decided based on those stocks that rank among the top 70 from the NIFTY Midcap 150 index based on their average daily turnover. The NIFTY Midcap 100 index is rebalanced semi-annually. The index follows a free-float methodology to calculate its market capitalization.

Based on the NIFTY Midcap 100 historical data, the index has provided a total return of 20.06% since its inception.

Nifty Midcap 100 Index Performance since 2011

In the past 5 years, the total return provided by the NIFTY Midcap 100 index has been 12.08%. The Nifty Midcap 100 hit an all-time / lifetime high of 22,928.80 on 05^th February 2021.

Constituents of the NIFTY Midcap 100 index

Nifty Midcap 100 weightage

The index is a representation of the various sectors with different weights attached to each sector. A detailed sector-wise weightage can be seen in the below chart:

Nifty Midcap 100 Stocks

The Index consists of both public and private sector companies. The top NIFTY Midcap 100 stocks with the highest weights in the index include:

The three largest stocks in the index belong to Apollo Hospitals Enterprise Ltd at 2.69%, followed by Shriram Transport Finance Co Ltd at 2.65% and Voltas Ltd at 2.30%, which come up to a total of 7.64% of the NIFTY Midcap Index.

When we compare the performance of these three stocks with the main NIFTY Midcap 100 index in the past year, it can be seen the index moves along with the fluctuations in the share prices of the top 3 weightage-wise companies comprises. Thus, it can be said that the consistent performance of the index’s constituents keeps it growing at a steady pace.

Just like the other indices, the NIFTY Midcap 100 does not have a share price, but the value of the index is determined based on the performance of the companies that it comprises.

The sectoral structure of NIFTY Midcap 100 is similar to that of the NIFTY 50 index with the top 3 sectors being Consumer Goods (29.14%), Financial Services (19.55%), Pharma (12.46%), and IT (6.6%) which make it a good complement to large-cap investments.

Top components of the NIFTY Midcap 100 index

• Apollo Hospitals

With a weightage of 2.69% in the NIFTY Midcap 100 index, Apollo Hospitals stands at the top of the index’s constituents. The company has shown consistent growth with a revenue of Rs.11,246 crore in March 2020 vs Rs. 9,617 crore in March 2019.

Similarly, its net profit stood at Rs.434 crore for FY 20 vs Rs. 199 crore in FY 19. The company has an Earnings per share (EPS) of Rs. 32.70 per share, with a return on capital employed (ROCE) of 11.04% in FY 2020.

• Shriram Transport Finance Co Ltd.

Shriram Transport Finance Co Ltd has a weightage of 2.65% in the index. The revenues for the company have shown steady growth in FY 2020 stood at Rs.16,562 crores vs Rs. 15,529 crores in FY 2019.

The net profit for FY 2020 however, has shown a slight fall to Rs. 2,501 crores vs Rs. 2,563 crores in FY 2019. As a result, their EPS also has shown a slight fall from Rs. 113.52 to Rs. 110.73 in FY 2020. Their return on capital employed (ROCE) stood at 16.63% for FY 2020.

• Voltas Ltd.

Voltas, with the 3rd highest weightage in the index, like the above two companies has been growing continuously YoY. Their revenue for FY 2020, stood at Rs. 7,658 crores vs Rs. 7,124 crores. Furthermore, their net profit also showed an increase to Rs. 589 crores in FY 20 vs Rs. 565 crores in the previous year. Their EPS stood at Rs. 15.63 and ROCE at 20% for the year ended March 2020.

Companies with strong financials that form a part of the index, contribute towards its performance in the long run.  

Benefits of investing in mid-cap companies

• Investors would be able to diversify their portfolios by investing in mid-cap companies along with their large-cap investments. Thus, investing in a NIFTY Midcap 100 fund would be beneficial to investors, as the index provides a combination of various sectors and the companies within such sectors.
  
  
• Mid-cap companies are less risky in terms of volatility and more liquid than small-cap companies.
  
  
  
• With the past performance and anticipated growth rate that India is expected to grow at, mid-cap companies are a good investment opportunity for investors. Fundamentally strong mid-cap companies will provide good profit numbers and can outperform large-cap equities in 2021, given their high growth rates.

Comparison between NIFTY 100, NIFTY Midcap 100, and NIFTY Smallcap 100:

In addition to the NIFTY Midcap 100, the NIFTY 100 comprises the top 100 companies belonging to the large-cap stock category i.e., with a market capitalization of more than Rs. 20,000 crores. Similarly, the NIFTY Smallcap 100 is the index that comprises companies belonging to the Smallcap stocks category i.e., with a market capitalization of less than Rs. 5,000 crores.

It can be said that Midcap and Smallcap companies are growing at a pace similar to the large-cap index, showing immense potential for growth and a good investment opportunity for investors willing to diversify their portfolios, with the help of businesses belonging to various notable sectors.

What is the difference between NIFTY Midcap 50, NIFTY Midcap 100, and NIFTY Midcap 150?

As per the NSE, the NIFTY Midcap 50 index represents 6% of the free-float market capitalization of those companies that are listed on the exchange. Similarly, the top 50 companies from the NIFTY Midcap 150 index. These companies also have derivative contracts available on them. The stocks without derivative contracts would not be included in the Midcap 50 index and the index would hold fewer than 50 stocks.

The 150 companies which are ranked from 101-250 i.e. After those under the NIFTY Midcap 100 companies based on the entire market capitalization of the NIFTY 500 would come under the NIFTY Midcap 150 index. The index represents 12.9% of the free-float market capitalization of those companies that are listed on the exchange.

The performance of the above three indices can be seen moving in tandem with each other from the chart of the NIFTY Midcap 50, NIFTY Midcap 100, and NIFTY Midcap 150 indices.

Midcap ETF options available to investors

Motilal Oswal Midcap 100 ETF

 The Motilal Oswal Midcap 100 ETF was launched in January 2011. The benchmark the ETF follows is the NIFTY Midcap 100 Index. The 5-year return provided by the ETF is 12.72% and since inception, it is 11.56%. It is a high-risk ETF and has a 99.34% holding of diversified equity.

Nippon India ETF Nifty Midcap 150

The ETF was launched in January 2019 and has a two-year return of 19.28%. As the name says it, the index followed by the ETF as a benchmark is NIFTY Midcap 150 and is a high-risk ETF.

Best performing mid-cap funds

Some of the best performing Midcap funds based on their performance in the past 5 years are:

DSP Midcap Fund – Direct Plan – Growth

The DSP Midcap fund is over 8 years old and is one of the options available to investors for long term investing. The benchmark followed by the fund is the NIFTY Midcap 100. The 5 years returns for this fund stand at 17.84% and since inception, the returns have been around 18.22%. This fund is highly risky and is a diversified equity fund.

Axis Midcap Fund – Growth

The Axis Midcap fund was launched in February 2011 and is another option for long term investing. The benchmark followed for this fund is the S&P BSE Midcap index. In the past 5 years the returns provided by this fund have been 17.65% and since inception, has been 18.06%.

Kotak Emerging Equity – Growth

The Kotak Emerging Equity Fund was launched in March 2007 and follows the NIFTY Midcap 100 as a benchmark. Over the past 5 years it has given a return of 17.15% and has a CAGR of 12.91% since its inception. It is a high risk, diversified equity fund for long term investment.

Invesco India Midcap Fund – Growth

The Invesco India Midcap Fund was launched in April, 2007 and follows the NIFTY Midcap 100 index. Since its inception, the fund has provided returns of 14.84% and for the past 5 years the returns have been 16.05%. It is a moderately high risk, equity diversified fund for long term investment.

The NIFTY Midcap 100 index has been a consistent performer and consists of companies with strong fundamentals. With the economy gradually coming back on track, the prospects for the index look bright and should be an interesting space for investors looking to diversify their portfolios.

Investors looking to invest in this index via ETFs or Mutual funds must consult a SEBI Registered Investment Adviser. Generally, an investor who has the willingness and ability to take risks can consider allocating some part of the portion to his/her portfolio.