As we all know that NSE is going to start trading in Nifty Midcap Select index from January 24, 2022, we need to understand how NSE select the stocks for this index.

It is a very simple method for selecting stocks for Nift50 Index. NSE identifies all the Nifty 100 large cap stocks based on free float market cap. Top 50 stocks will be the part of Nifty50 Index. But when we talk about the process to select stocks in Nifty Midcap Select Index (NSE Symbol: MIDCPNIFTY), it is a little bit complex but easy to understand. Let’s take a view on it.

We need to understand 3 things to understand the selection criteria.

1. Eligible Universe: All the companies which are the part / going to be part of Nifty Midcap 150 and have Futures & Options contracts for trading will be the part of Eligible Universe.
2. Ranked Universe: Companies in Eligible universe will be sorted based on 6 months average of Full market capitalization. The top 5 companies will become the part of Ranked universe.
3. Re-Ranked Universe: After Ranked universe, the rest companies in eligible criteria will be sorted based on 6 months average of full market cap and 6 months average of daily turnover. Top 50 companies of this list will become the part of Re-Ranked Universe.

Also Read: Sectors & stocks weightage in Nifty Midcap Select Index

After shorting as per above criteria, the forming of Index will get started. From these 25 stocks, all five stocks of Ranked universe will be the part of the index. Then Top 20 companies based of Free float market cap from Re-Ranked universe will be included in the index. Hence, the Nifty Midcap Select index become a portfolio of Focused 25 stocks within the Nifty Midcap 150 index. The weightage of these 25 companies will be given on the basis of free float market cap. Means, the company with highest free float market cap will get highest weightage in MIDCPNIFTY.

This Index is reviewed on semi-annual basis in March and September. All the companies which are not part or fall beyond the 30th rank in re-ranked universe will compulsory be excluded from Nifty Midcap Select Index. Five companies in Ranked universe and Top 10 companies of Re-ranked universe will compulsory be included in the Index. The company, who has 1.5 times free float market cap then the smallest company in Index, will also be included in the Index.

Nifty Midcap Select index have 84% correlation with Nifty50. Hence, we can say these new Futures and Options Contracts may create a good opportunity for traders and arbitragers.

Click here to know more about long term investment in Index.

Happy Investing!

This article is for education purpose only. Kindly consult with your financial advisor before doing any kind of investment.