Nippon India Nifty Midcap 150 Index Fund Review

Published on / By M. Pattabiraman Twitter: @pattufreefincal

Published: February 4, 2021 at 4:00 pm

Last Updated on December 29, 2021

Nippon India Nifty Midcap 150 Index Fund is an open-ended index fund tracking the Nifty Midcap 150 index – the second such fund after Motilal Oswal Nifty Midcap 150 Index Fund. The NFO period for the Nippon India fund begins Feb 4 and lasts until  Feb 12th 2021.

What is the Nifty Midcap 150 Index?  Out of the top 500 stocks by free-float market cap listed on the NSE, the top 50 from the Nifty 50, the next 50 forms the Nifty Next 50, the top 100 forms the Nifty 100, the next 150 forms the Nifty 150 Mid cap index. The top 100 stocks are classified (quite arbitrarily!) as large cap, the middle 150 as mid cap and the bottom 250 as small cap.

As shown before, The Nifty Next 50 index is NOT a large cap index and is actually a midcap-like index because of high impact costs – big difference between the bid price and sell price as volume increases.

So the only question that investors need to ask before investing midcap or small cap index funds or ETFs is, will these provide a better return than the Nifty Next 50 index? A midcap index will be harder to manage (higher tracking error) and will cost more (than Nifty or Nifty Next 50 index funds).

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    In fact, we just saw Motilal Oswal Nifty Midcap 150 Index fund “outperformed” its index because of this tracking error:  Six Index Funds “Outperform” their benchmarks in the last year! Intuitively a 150 stock index fund will be a bit less volatile than a 50 stock index, but will it be more rewarding?

    Some investors argue that active funds should be used in the mid cap space because fund managers can easily beat a mid cap index. This is not true! Only 6 Midcap Mutual Funds beat Nifty Midcap 150 in the last 5 years. Also see: Only four midcap mutual funds have outperformed Nifty Next 50 consistently and Only these 3 Small Cap MFs have outperformed Nifty Next 50 consistently.

    Another question that investors ask is, “I already have Nifty 50 and Nifty Next 50 index funds, should I also buy a Nifty Midcap 150 index for better market coverage?” The answer is ‘not necessary’ as we shall see below. This has also been considered before: Should I start a SIP in Midcap 150 Index fund for diversification?

    Nifty Midcap 150 TRI vs Nifty Next 50 TRI

    Since inception evolution of Nifty Midcap 150 Index TRI compared with Nifty Next 50 TRI index
    Since inception evolution of Nifty Midcap 150 Index TRI compared with Nifty Next 50 TRI index

    The two indices pretty much fall on top of each other! This is also reflected in the rolling returns over every possible 5, 7, 10 years.

    Five year rolling return comparison of Nifty Midcap 150 TRI and Nifty Next 50 TRI indices
    Five-year rolling return comparison of Nifty Midcap 150 TRI and Nifty Next 50 TRI indices
    Seven year rolling return comparison of Nifty Midcap 150 TRI and Nifty Next 50 TRI indices
    Seven-year rolling return comparison of Nifty Midcap 150 TRI and Nifty Next 50 TRI indices
    Ten year rolling return comparison of Nifty Midcap 150 TRI and Nifty Next 50 TRI indices
    Ten-year rolling return comparison of Nifty Midcap 150 TRI and Nifty Next 50 TRI indices.

    In summary, there is nothing “extra” that an investor would get by buying Nippon India Nifty Midcap 150 Index Fund or any other MIidcap (or small cap) index fund ETF. Investors can give this a miss.

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      Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
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