New NSE Index Launched To Track Select Mid Cap Companies

Mumbai, October 25: NSE indices, a subsidiary of NSE’s index, recently launched a mid cap index titled Nifty Midcap150 Quality 50, which is a quality-factor based smart-beta index. The index comprises Top 50 companies from its parent company Nifty Midcap 150 index, depending upon their ‘quality’ scores. To arrive at these selected companies, a quality score for each one of them was determined and analysed, based on their returns on equity, financial leverage and earning per share (EPS) growth parameters of the last five financial years. That said the weight of each stock in the index is a combination of stock’s quality score as well as its free float market capitalisation. 

On the other hand, the index composition is reconstituted semi-annually with the base date being taken as April 1, 2005 and the base value being 1000. According to the management, the new index was launched with a motive to develop and encourage the space of passive fund management. Sharing his views on the same, Mukesh Agarwal, CEO, NSE Indices, says, “Exchange Traded Funds (ETFs) and Exchange Traded Products (ETPs) tracking such indices steadily increased at a rate of more than 20 per cent per annum during the past 5 years to reach $756 billion, as on June 30, 2019. In India, with availability of various smart beta indices, ETFs based on such indices are also expected to pick up.” 

For asset managers who are looking for an accurate and reliable metric, the index would act as a benchmark that measures risk-return dynamics based on the quality mid cap portfolios. The index is expected to be a reference index when it comes to tracking passive funds, ETFs as well as other structured products and index funds.