BSE Mid-Cap

What is BSE MidCap?

The S&P BSE MidCap, often referred to as the BSE MidCap, is a benchmark index comprising mid-cap companies listed on the Bombay Stock Exchange. The term "mid-cap" refers to companies with a market capitalization that falls between large-cap and small-cap companies. According to the Securities and Exchange Board of India (SEBI), companies that rank between 101 and 250 in terms of market capitalisation are categorised as mid-cap companies.

The mid-cap segment is a very important section of the market and mostly consists of companies with strong growth potential. However, they also carry higher risks compared to the large-cap segment. By tracking and measuring the performance of the mid-cap segment, the BSE MidCap index serves as a barometer for investors to gauge the health and trajectory of this segment of the market.

The S&P BSE MidCap index makes up about 15% of the total market capitalisation of the S&P BSE AllCap index. The top five sectors of the index include consumer discretionary, financial services, healthcare, Industrials and Information Technology. The top 10 constituents by index weight, meanwhile, are as follows:

Note: The data is as of March 28, 2024.

How are stocks selected for BSE MidCap?

The S&P BSE MidCap index constituents are carefully selected after thorough consideration to represent the mid-cap segment accurately. Here’s a quick overview of the process that the index committee of the Bombay Stock Exchange follows to construct the index.

First, the committee ensures that only stocks that feature in the S&P BSE AllCap index are considered. Then, the committee ranks all of the constituents of the BSE AllCap index in terms of cumulative average daily total market capitalisation and sorts them in descending order. The top 70% of the stocks are assigned to the BSE LargeCap index. The next 15% of the stocks are included in the S&P BSE MidCap index.

The BSE MidCap index is subject to quarterly reviews in the months of June, September, December and March and is rebalanced once every year in September. The periodic review and rebalancing ensure that the index remains relevant and accurate throughout the year.

What is the procedure to compute float-adjusted market capitalization in the BSE MidCap index?

The constituents of the S&P BSE MidCap index are weighted according to the float-adjusted market capitalisation method. Stocks with high float-adjusted market capitalisation are assigned higher weights, and vice versa. Here’s how it is computed.

Step 1: Calculation of Market Capitalisation

The market capitalization of each stock in the BSE MidCap index is calculated using the following formula.

Market Capitalisation = Current Market Price * Number of Outstanding Shares

Step 2: Adjustment for Free-Float

Once the market capitalisation of each stock is calculated, each individual stock is adjusted for free float by multiplying the market cap with a free-float factor. This factor will vary from one company to another, depending on the proportion of shares freely available for trading. Here’s the formula that’s used to calculate free-float market capitalisation.

Free-Float Market Capitalisation = Market Capitalisation * Free-Float Factor.

The adjustment for free-float ensures that only the shares that can be traded publicly with other investors are considered by disregarding locked shares, shares with the promoters or employees (ESOP shares) and other restricted shares from the calculation.

Is investment in S&P BSE MidCap safe?

Since the S&P BSE MidCap is an index, you cannot directly invest in it. However, there may be certain mutual funds that invest in the same constituents as the index in a bid to track and replicate its performance. Investing in such mutual funds should give you exposure to the index.

That said, it is essential to note that the performance of the S&P BSE MidCap index is heavily dependent on market conditions. Although investing in a mutual fund based on the index may provide you with the opportunity to participate in the growth of a diverse range of mid-sized companies across various sectors, it is important to recognise that they also come with inherent risks.

Therefore, you must ensure that you conduct thorough research and assess your risk tolerance before allocating capital to stocks featured in the BSE MidCap index or funds based on it.

S&P BSE MidCap FAQ's