Nifty Next 50 Vs Nifty Midcap 150 – Which is best?

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Those who wish to construct the portfolio based on the Index have always been in the dilemma of which is the best in Nifty Next 50 Vs Nifty Midcap 150 Index. Even I always recommend skipping Nifty Midcap 150 and sticking to Nifty Next 50 Index. However, let us see what the past data indicates to us.

What constitutes the Nifty Next 50 Index?

Nifty Next 50 Index constitutes the stocks which are from 51 to 100 stocks from the universe of Nifty 100 stocks. The first 50 stocks are in Nifty 50 Index. NIFTY Next 50 is computed using free float market capitalization method wherein the level of the index reflects total free float market value of all the stocks in the index relative to a particular base market capitalization value.

Index is re-balanced on semi-annual basis. The cut-off date is January 31 and July 31 of each year, i.e. For semi-annual review of indices, average data for six months ending the cut-off date is considered. Four weeks prior notice is given to market from the date of change.

Company’s Name Weight in %
Apollo Hospitals Enterprise Ltd. 4.71%
Avenue Supermarts Ltd4.27%
Adani Enterprises Ltd.3.76%
Info Edge (India) Ltd.3.69%
Vedanta Ltd.3.62%
Adani Green Energy Ltd.3.2%
ICICI Lombard General Insurance Company Ltd.3.01%
Adani Transmission Ltd.3.01%
Godrej Consumers Products Ltd.2.87%
Dabur India Ltd.2.85%

If we go by sector-wise, the Index looks like below.

Nifty Next 50 Index Sectorwise Holding

But you noticed that among the top holdings of the Nifty Next 50 Index, 3 Adani Group of companies has a higher weightage. Combined together the weightage of these three companies is 9.97%. This creates a bit of concentrated risk towards one group of companies.

Again if you look at the sector-based approach, as usual, Financial Services is a leader followed by consumer goods and metals.

What constitutes the Nifty Midcap 150 Index?

The Nifty Midcap 150 index consists of 150 companies (companies ranked 101-250) based on full market capitalization from the Nifty 500 Index. NIFTY Midcap 150 Index is computed using the free-float market capitalization method, wherein the level of the index reflects the total free-float market value of all the stocks in the index relative to a particular base market capitalization value.

The top constituents of the Nifty Midcap 150 Index are as below.

Company’s Name Weightage
Adani Total Gas Ltd. 2.55%
Tata Power Co. Ltd. 2.13%
Zee Entertainment Enterprises Ltd. 1.73%
SRF Ltd. 1.69%
Shriram Transport Finance Co. Ltd. 1.64%
Voltas Ltd. 1.61%
MindTree Ltd. 1.61%
Crompton Greaves Consumer Electricals Ltd. 1.53%
Bharat Electronics Ltd. 1.41%

If you look sector-based approach then the Index looks like below.

Nifty Midcap 150 Index Sectorwise Holding

Here also you noticed that Adani Group of companies has an edge as the biggest holding of around 2.55% is towards Adani Total Gas Ltd. However, if you look at Nifty Next 50, this exposure seems to be too little.

If we go by sector-wise holding, again Financial Services top the list with 16.73% followed by Consumer Goods and Industrial manufacturing.

Now by looking at both the sectors, you found out that in Nifty Next 50 Adani groups have a major edge and the top 3 sector-wise holdings are Financial Services, Consumer Goods, and Metals. However, in the case of the Nifty Midcap 150 Index, Adani Group of the company have major holding but the total exposure is around 2.55% and instead of metal, the industrial manufacturing is in the top 3 holding sectors.

Nifty Next 50 Vs Nifty Midcap 150 – Which is best?

Now let us try to find which is the best Index for us to consider between Nifty Next 50 Vs Nifty Midcap 150. For this comparison, I have considered the Total Return Index (TRI) which considers both capital gains as well as any cash distributions, such as dividends or interest, attributed to the components of the index. Hence, as all funds now benchmark themselves the TRI, I too considered TRI values for comparison.

Even though we have Nifty Next 50 TRI Index values available from Jan 2003, the Nifty Midcap 150 TRI Index data is available for us from 1st April 2005. Hence, to bring in the uniformity, I am considering the comparison from 1st April 2005 to 8th December 2021. In this, we have around 3991 daily data. Let us see how the numbers look and what they actually depict.

Assume that you invested Rs.1,000 in both the Index on 5th April 2005, then what are the values as on 8th December 2021?

Nifty Next 50 Index Vs Nifty Midcap 150 Index

The final values of investment as on 8th December 2021 are Rs.12,069 for Nifty Next 50 Index Fund and Rs.14,379 for Nifty Midcap 150 Index Fund. However, you noticed from above graph that the returns are almost identical since 2005. Only from last one year Nifty Midcap 150 Index performing better and hence the return differences.

However, this above chart will not gives us a clear picture. Hence, let us go into rolling return data to understand the volatility.

1 Year Rolling Returns of Nifty Next 50 TRI Index Vs Nifty Midcap 150 TRI Index

Let us start with 1-year rolling returns comparison of both the funds. The graph looks like below.

You noticed that since 2005 the returns are almost identical. The highest returns for Nifty Next 50 was around 189% and for Nifty Midcap 150 it was 163%. The lowest for the Nifty Next 50 was -66% and for Nifty Midcap it was -68%. What indicates this is that Nifty Next 50 generated higher returns over Nifty Midcap 150 with lower downside protection.

If we draw the drawdown chart of both the Index, they look like below. A drawdown is simply the % of fall from each of its past peaks.

Nifty Next 50 TRI Vs Nifty Midcap 150 TRI Drawdown for 1 Yr Rolling Returns

You noticed that the Nifty Midcap 150 Index has lower downside protection than the Nifty Next 50 Index. Hence, the winner by looking at 1-year rolling returns is obviously Nifty Next 50 (but look at recent data, the trend seems to be reversing. However, we will discuss this asper later).

3-Years Rolling Returns of Nifty Next 50 TRI Index Vs Nifty Midcap 150 TRI Index

Let us now move towards 3 years rolling returns of Nifty Next 50 TRI Index Vs Nifty Midcap 150 TRI Index.

Nifty Next 50 TRI Vs Nifty Midcap 150 TRI 3 Yrs Rolling Returns

You noticed that the results are not so different. The highest returns for Nifty Next 50 was around 43% and for Nifty Midcap 150 it was 39%. The lowest for the Nifty Next 50 was -14% and for Nifty Midcap it was -15%. What indicates this is that Nifty Next 50 generated higher returns over Nifty Midcap 150 with lower downside protection.

If we draw the drawdown chart of both the Index, they look like below. A drawdown is simply the % of fall from each of its past peaks.

Nifty Next 50 TRI Vs Nifty Midcap 150 TRI Drawdown for 3 Yrs Rolling Returns

Notice that majority of the time it is the Nifty Midcap 150 TRI Index which is down than Nifty Next 50 TRI Index.

5-Years Rolling Returns of Nifty Next 50 TRI Index Vs Nifty Midcap 150 TRI Index

Now let us move on to the 5 years rolling returns comparison.

Nifty Next 50 TRI Vs Nifty Midcap 150 TRI 5 Yrs Rolling Returns

Here also, you noticed that the results are not so different. The highest returns for Nifty Next 50 was around 29% and for Nifty Midcap 150 it was 29.2%. The lowest for the Nifty Next 50 was -0.2% and for Nifty Midcap it was -2.6%. What indicates this is that Nifty Next 50 generated higher returns over Nifty Midcap 150 with lower downside protection.

If we draw the drawdown chart of both the Index, they look like below. A drawdown is simply the % of fall from each of its past peaks.

Nifty Next 50 TRI Vs Nifty Midcap 150 TRI Drawdown for 5 Yrs Rolling Returns

Notice the chart. You will find that sometimes it was Nifty Next 50 and sometimes it was Nifty Midcap 150 Index.

10-Years Rolling Returns of Nifty Next 50 TRI Index Vs Nifty Midcap 150 TRI Index

Let us move on to see the 10 years rolling returns.

Nifty Next 50 TRI Vs Nifty Midcap 150 TRI 10 Yrs Rolling Returns

Here also, you noticed that the results are not so different. The highest returns for Nifty Next 50 was around 24% and for Nifty Midcap 150 it was 23.3%. The lowest for the Nifty Next 50 was 7.1% and for Nifty Midcap it was 7.3%. What indicates this is that Nifty Next 50 generated higher returns over Nifty Midcap 150 with lower downside protection.

If we draw the drawdown chart of both the Index, they look like below. A drawdown is simply the % of fall from each of its past peaks.

Nifty Next 50 TRI Vs Nifty Midcap 150 TRI Drawdown for 10 Yrs Rolling Returns

Now we have rolling returns for 1 year, 3 years, 5 years and 10 years and along with that the respective drawdown data. From overall what it brings into conclusion that Nifty Next 50 acts exactly like Nifty Midcap 150. In fact little bit more volatile than Nifty Midcap 150 (if you observe the 5 years and 10 years rolling returns). However, with respect to risk adjusted returns, Nifty Next 50 shows the better returns.

Onre more thing you noticed that from the last one year Nifty Midcap 150 Index is performing better. But it does not mean it may continue to perform in the future also. You noticed that the return margins are not much. One more point to consider if someone wish to adopt Nifty Midcap 150 Index is that tracking error of Midcap Funds are high. Hence, just because of recent under performance with respect to Nifty Next 50 Index, it is not worth to switch from Nifty Next 50 Index to Nifty Midcap 150 Index.

My choice still remains same with Nifty Next 50 as a midcap replacement and no change in it.

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10 Responses

  1. Hello Basavaraj,
    Thank you for the detailed analysis. I’ve been investing just in N50 & NN50 almost 3 years & no 0ther funds.
    I see some good companies are in Midcap 50. Fortunately Axis MF has launched Midcap 50 Index fund NFO.
    Can you help to make similar study for Next 50 vs Midcap 50 instead of Midcap 150?

  2. Dear Sir,

    Your articles are very good. May I request an article on asset allocation into different category of mutual funds i.e Large Cap, Large and Mid Cap, Mid Cap, Small Cap, International fund, etc. I understand it varies from investor to investor. But considering Aggressive, conservative, etc if something could be suggested

    Further to that also please suggest following
    a) Best book on Mutual fund understanding to take better decisions and do analysis of my portfolio(I have fair knowledge but not that good to take better decisions and analysis)
    b) How to track rolling returns easily

    1. Dear Vishal,
      Sure..I will try to do that.
      a) Refer John Bogle’s Books.
      b) Better you can use some online tools or can do it on your own.

  3. Dear Sir,

    I really appreciate your efforts to make us financially literate about such products. What is best platform to invest in Nifty 50 next and what should b the horizon to hold investments. If I invest around 5K per month for 10 years. Is it fine for this period

    1. Dear Upin,
      Don’t decide the time horizon based on the product. But it should be based on your financial goals.

  4. Hi Basavaraj Sir,

    Am followers of your blogs for 10+ years .
    Its good to see your prompt & quick responses to general public queries.
    Thanks for your initiative to make the world Financially Educated(Right Investment).

    We are looking forward see your review and recommendations on Mutual Funds for 2022 similar to “Top 10 Best SIP Mutual Funds to invest in India in 2021”

    Regards,
    Basavanagowda

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