Smart Asset Allocation: Utilising the Breakdown from Nifty500 to Nifty Midcap Select Indices

In the dynamic landscape of financial markets, smart asset allocation stands as a cornerstone of successful investment strategies. One avenue for optimising allocation is by delving into the breakdown from the Nifty500 to the Nifty Midcap Select indices. This approach allows investors to gain deeper insights and potentially uncover opportunities within different segments of the market. In this article, we explore how understanding this breakdown can enhance asset allocation decisions and provide a clearer perspective on navigating the complexities of the market. The major Nifty indices can be broken down for easier understanding:

1. Nifty 500 Index:

   • The Nifty 500 index comprises the top 500 companies based on their full market capitalisation from the eligible universe.
   • It represents a broad cross-section of the Indian stock market, including both large-cap and mid-cap companies.

2. Nifty 100 Index:

   • The Nifty 100 index consists of the top 100 companies based on their full market capitalisation from the Nifty 500.
   • Its purpose is to measure the performance of large market capitalisation companies.

3. Nifty 50 Index:

   • Within the Nifty 100 universe, 50 companies are selected based on various parameters such as free float market capitalisation and average impact cost.
   • These 50 companies form a part of the Nifty 50 index, which represents the 50 most actively traded and highly liquid stocks in the Indian market.

4. Nifty Next 50 Index:

   • The remaining 50 companies from the Nifty 100 index constitute the Nifty Next 50 index.
   • This index includes companies that are not part of the Nifty 50 but still have significant market capitalisation and liquidity.

5. Nifty Midcap 150

   • The Nifty Midcap 150 Index itself comprises mid-cap companies ranked between 101st and 250th based on their average full market capitalisation.
   • Nifty Midcap Select Index aims to track the performance of a carefully curated set of 25 mid-cap stocks from the broader Nifty Midcap 150 Index that meet specific criteria of market cap, average daily turnover, liquidity and stocks traded on NSE’s Futures & Options (F&O) segment.
     

Dissecting sectoral composition of Nifty 50, Nifty Next 50 and Nifty Midcap Select 

Comparative Sector weights Nifty Next 50 vs. Nifty50 vs. Nifty Midcap Select

Source: niftyindices.com

It is also interesting to note that, based on the methodology used in index construction, there is no overlap of stocks between the Nifty 50 index, Nifty Next 50 index and the Nifty Midcap Select index. Thus it forms an interesting strategy for asset allocation across different stocks for equity investing.

Once the sectoral allocation has been understood, there are various investment instruments in the form of ETFs, Mutual Funds and index derivative products that can be chosen by the investor to suit their investment goals and risk appetite.

In summary, the Nifty indices provide a comprehensive view of the market cap led broad based view of the Indian stock market by capturing companies of varying sizes and market capitalisation levels.