Nifty Midcap 150 Momentum 50 Index: Constituent Stocks, Key Sectors and Historical Returns

The Nifty Midcap 150 Momentum 50 Index can be defined as strategy index comprising 50 stocks selected on the basis of their normalised momentum score from the larger Nifty Midcap 150 Index. The normalised momentum score of individual stocks is calculated on the basis of the 6 month and 12 months price return of each stock after being adjusted for volatility.

Additionally, the weight of an individual stock on this momentum index is a combination of the stock’s normalised momentum score and its free-float market capitalization. Uses of this index include creation of structured products, exchange traded funds (ETFs), index funds as well as benchmarking of schemes like momentum funds.

Some factors to keep in mind regarding inclusion of a specific stock in the Nifty Midcap 150 Momentum 50 Index include:

The 50 midcap momentum stocks featured in the Nifty Midcap 150 Momentum 50 Index are selected from the listed stocks that are part of the larger Nifty Midcap 150 Index. However, the individual weight of each stock is different. The below table lists the top 10 midcap stocks featured on this index along with their individual weight as of December 30, 2023:

The Nifty Midcap 150 Momentum 50 Index is a diversified index as it includes stocks from a variety of sectors. Below are the key sectors that the index is exposed to and their individual weight on this momentum index as of 31 December 2023:

Typically, midcap stocks are considered to be equity investments that have high medium to long-term growth potential, but tend to quite volatile in the short term. Below are the 1 year, 5 year returns and returns since inception of the Nifty Midcap 150 Momentum 50 Index (TRI) returns as of 31 December, 2023:

While past performance does imply that the trend will continue in the same manner in the future, historically, the midcap stocks included in this momentum index have provided high returns in not just the short-term but also over longer investment horizon such as 5 years. So, investors seeking to diversify their portfolios with midcap stocks that exhibit strong momentum and the promise of continued growth can choose to invest in schemes that track this index.

One way to invest in the 50 stocks that comprise the Nifty Midcap 150 Momentum 50 Index is to separately purchase each stock from the stock market. However, this can be cumbersome process and maintaining the right allocation towards 50 individual stocks can be quite difficult. There are however two alternatives that investors can opt for instead – an ETF or an Index Fund that tracks this momentum index.

• Exchange Traded Funds (ETFs): An ETF that tracks this index will feature the 50 momentum stocks in the same proportion as the index as its underlying asset. Exchange Traded Fund unit can be traded on the stock exchange in real-time like any regular equity stock. However, a demat account is mandatory for ETF investments in India.
• Index Funds: Index Funds are passively managed mutual fund schemes or ULIP plans that aim to replicate the portfolio as well as performance of their chosen index. So, the Max Life Nifty Midcap Momentum Index Fund will feature a portfolio of the 50 constituent stocks in the same proportion as this momentum index.

These can be a simple and more cost-effective way to benefit from momentum investing strategies. Especially, when one considers that these schemes feature professional management of schemes that can tip the odds in favor of novice investors.

Momentum investments that focus on midcap stocks are prone to a high degree of short-term volatility even though they have the potential to deliver high returns in the medium to long term. So such investments are not suitable for all types of investors. Especially new or novice investors who have little or no experience of how equity investments work.

But investors who have high risk tolerance, are prepared to stay invested in the long term and want to diversify by including midcap stocks in their portfolio can definitely choose to invest in index schemes or ETFs that track the Nifty Midcap 150 Momentum 50 Index. But experts recommend limiting portfolio exposure of momentum schemes to low levels such that these investments do not exceed 15% of the overall investment portfolio. This can aid investors in better risk management by ensuring there is scope for adequate diversification different asset classes beyond equities like debt, real-estate, gold, etc. by using different asset allocation strategies.