Nifty Midcap 100

Eligibility Criteria

According to the NIFTY market indices methodology document published by the India Index Services & Products Limited, following are the eligibility criteria to be fulfilled by the companies to become a part of the NIFTY Midcap 100 index:

1. The equity shares of the company must be listed on the National Stock Exchange. Instruments that provide a fixed return like convertible stock, bonds, preferred stock, rights, and warrants are not eligible for inclusion in the index.
2. Equities with differential voting rights are also eligible for the inclusion in the index, provided they fulfil certain criteria.
3. All the companies must be a part of the NIFTY 500 index.
4. For an equity that has been newly listed, the eligibility criteria is examined based on the data taken over a three-month period.
5. To understand NIFTY Midcap 100 better, you need to understand the NIFTY Midcap 150 index. This index represents the 150 companies ranked 101-250 in the NIFTY 500 index, based on full market capitalisation.

NIFTY Midcap 100 index comprises top 50 companies based on full market capitalisation from the NIFTY Midcap 150 index. The remaining 50 companies are selected from the same index, based on average daily turnover. If this average daily turnover is among the top 70 constituents in the NIFTY Midcap 150, then the securities will be included. However, if the average daily turnover is below 130 among the constituents of the index, then the companies will not be considered.

How is NIFTY Midcap 100 Calculated?

The NIFTY Midcap 100 is calculated based on the following formula:

Free Float Market Capitalisation = Shares Outstanding x Price x Investible Weight Factor (IWF)

Index Value = [(Current Free Float Market Capitalisation)/(Base Free Float Market Capitalisation)] x (Base Index Value)

Investible Weight Factor implies the number of shares which are available to the public for general trading. These shares are not held by groups or entities which have strategic or a controlling interest in the company. Higher the IWF, greater is the proportion of shares held by the investors under the public category.

Base Index Value is an arbitrary figure that implies the initial value of the index (in this case, it is 1,000), while Base free float market cap is the market cap calculated on the Base Date (January 01, 2003). Free float market capitalisation of the index is the sum of free float market cap of all the 100 companies listed in the NIFTY Midcap 100 index.

Factors Affecting NIFTY Midcap 100

As mentioned earlier, NIFTY Midcap 100 comprises 100 constituent companies whose securities are traded in the stock markets. Therefore, this index is affected by several factors like:

1. Inflation
2. Interest Rates
3. International Markets
4. Gross Domestic Product Data
5. Prices of Gold

1. Fuel price volatility
2. Industrial Production Data
3. Stability and performance of the government

Any change in these factors can severely impact the stock markets and correspondingly, the market indices. For instance, if the key policy interest rates are hiked by the Reserve Bank of India, then the cost of borrowing becomes automatically expensive. For companies, this means cutting back their costs or laying off workers to compensate for higher interest rates. All these factors add up to cause a dive in the markets.

How to Invest in NIFTY Midcap 100?

In order to invest in the NIFTY Midcap 100, you will have to invest in the individual stocks. It is advisable to undertake thorough research on each of these companies before you start investing. In order to get started, all you have to do is open a DEMAT account and join any of the numerous online stock brokers. Alternately, you can also look into mutual funds and index funds to invest your money.

Stocks vs. Mutual Funds: Here's What We Recommend

Stock market investments require a lot of research and knowledge. They do not generally offer any tax benefits and are regarded as high-risk investments. Hence,it is crucial to have a diversified portfolio. At Bankbazaar, we encourage our readers to invest on mutual funds.It doesn't require a lot of knowledge and equity linked mutual fund schemes offer tax benefits. Additionally, since mutual funds comprise stocks from multiple companies, they help in building a diversified portfolio.