As of September 2023, There are more than 1900 companies listed on the main board of the National Stock Exchange of India (NSE)
These listed equity stocks can be broadly classified into different size segments based on their market capitalization as large-cap, mid-cap, small-cap, and micro-cap. Large-cap are the top 100 stocks by full market capitalization, mid-cap stocks are the 150 stocks that are ranked between 101-250 by full market capitalization, small-cap stocks are the 250 stocks that are ranked between 251-500 by full market capitalization and micro-cap stocks are stocks smaller than small-cap and rank beyond the top 500.
NSE Indices Ltd. has developed the Nifty LargeMidcap 250 index which provides exposure to both large and midcap segments in a single index. The 250 stocks of the Nifty LargeMidcap 250 Index cover approximately 84% of the full market capitalization, around 87% of the free-float market capitalization, and approximately 69% of the total liquidity of all traded equity stocks at NSE based on the 6-month average as of September 29, 2023.
About the Nifty LargeMidcap 250 Index:
The Nifty LargeMidcap 250 Index aims to reflect the performance of the large and midcap companies listed at NSE with 50% weight allocated to each segment. The 250 stocks of Nifty LargeMidcap 250 Index are the combination of the universe of stocks forming part of Nifty 100 Index and Nifty Midcap 150 Index.
Sectoral composition of the Nifty LargeMidcap 250 viz-a-viz Nifty 100 and Nifty Midcap 150 Index
As of September 29, 2023, the Nifty LargeMidcap 250 Index has exposure to 20 sectors whereas the Nifty 100 Index has exposure to 17 sectors. The largest sectors in the Nifty LargeMidcap 250 Index are the Financial Services (27.74%), Information Technology (9.06%), and Capital Goods (7.89%) sectors.
Less concentrated than Nifty 100 and Nifty Midcap 150 index:
The combined weight of the top 4 sectors in the Nifty LargeMidcap 250 index is ~52% which is less concentrated than the Nifty 100 index and the Nifty Midcap 150 index, where the combined weight of the top 4 sectors is ~66% and ~54% respectively.
Weight of top 10 stocks in the Nifty LargeMidcap 250, Nifty 100 and Nifty Midcap 150 Index
As of September 29, 2023, the Nifty LargeMidcap 250 index has exposure to both large and midcap stocks. The weight of the top 10 stocks in the Nifty LargeMidcap 250 index is 24.6% whereas, the weight of the top 10 stocks in the Nifty 100 stocks is 49.44%, which shows that the weight of stocks in the Nifty LargeMidcap 250 index is relatively well distributed as compared to the Nifty 100 index (large cap index).
The Nifty LargeMidcap 250 Index has outperformed the Nifty 100 Index in 11 out of the last 19 calendar years
Large caps, which are usually characterized by stable returns and lower volatility in the long term tend to tide over phases of economic downturn relatively better than mid-caps. However, during phases of economic recoveries and mega bull runs large caps generally underperform their mid-cap counterparts. Stability in the performance of large-cap stocks (represented through the Nifty 100) can be observed during the global financial crisis of 2008 followed by the global economic slowdown in 2011 and in 2018, where large caps (represented through Nifty 100) have delivered better returns as compared to the midcaps (represented through Nifty Midcap 150).
A balanced fit between Nifty 100 and Nifty Midcap 150
The Nifty LargeMidcap 250 Index has outperformed the Nifty 100 Index in 11 out of the 19 calendar years and the Nifty Midcap 150 index in 7 out of the 19 calendar years from CY 2005-2023. For most of the years, the Nifty LargeMidcap 250 index, witnessed returns that are in-between the large and mid-caps, thereby striking a balance between both downturn and economic recoveries.
@bhuvan Could you elaborate a bit on the various rules / triggers involved
in rebalancing or deciding the weights of each stock in this index?
The NIFTY index methodology is not very intuitive especially for this LargeMidcap 250 index.
I beleve it will be very useful to showcase the behaviour of the index in various hypothetical scenarios.
For example…
What happens to the value of the index if a midcap stock doubles its price?
What happens to the value of the index if a midcap stock loses 90% of its price?
What happens in a period when there is a rally in midcaps and largecaps are stagnant?
< other such scenarios (especially any corner-cases you can think of) and the impact/behaviour of the index>
I beleive having a wide range of such examples
will help everyone understand the benefits (and risks)
associated with this Nifty LargeMidcap 250 Index.
Potential wealth destruction of midcaps/smallcaps is not fully captured in 5yr CAGR. I hope some remember 2016-2018 period. LC always have that premium, and also top 100 make 80% mkt cap but in all sense bcos of low weightage there is no huge benefit of mixing bottom 50 with top 50
ya right, so see the 5 yr in general with great entries from lows in 2019 which marks 5yr window for the cagr probably 20% down from rally of 16-18
but still to stay with the topic, its about the top 50 vs bottom 50-100 weightage/tracking error and genuine need for 10% exposure
might as well split mkt cap wise
The concern from my side is that the index seems to be toooo overly diversified and I’m not sure about the tracking errors which follow it up with every rebalancing.
Also personally, I’m more comfortable with restricted number of stocks say 30-40 max
Thank you Bhuvan.
I see this concise sumamry in the factsheet you shared above.
To have equal exposure to the large cap and mid cap segment,
the aggregate weight of large cap stocks and mid cap stocks is capped at 50% each
and is reset on a quarterly basis.
Weight of the stock within each size segment is based on its free-float market capitalization.
Every 3 months,
the target-% for each individual stock held in a Nifty LargeMidcap250 fund
will be arrived at as follows?
50%-points divided between 100 NIFTY-Largecap-100 stocks, in the relative value of their market-caps.
% of each Largecap stock = 50 * (market-cap of a large-cap stock / market-cap for NIFTY-Largecap-100)
50%-points divided between 150 NIFTY-Midcap-150 stocks, in the relative value of their market-caps.
% of each Midcap stock = 50 * (market-cap of a mid-cap stock / market-cap for NIFTY-Midcap-150)
And the fund house shall eliminate any deviation
between the relative holdings and the above calculated target-%,
by purchasing or selling-off individual stocks on the rebalancing day (every quarter) until the target-% are met?
After closure of new offer of Nifty LargeMidcap 250 index when can I enter in since I missed depositing on 3rd Nov. I am new to mutual funds. I am a DIY day and shorterm trader. It is just to experiment with a small amount.
with 220+ of them having 1% weightage on the index
The winners get bigger. I didn’t understand how that’s a problem.
