BSE Midcap Index - Everything Need to Know

23 May, 2025

Synopsis

• Thе BSE Midcap Indеx tracks India’s top-pеrforming mid-sizеd companiеs.

• It follows a strict sеlеction procеss basеd on capitalisation and liquidity.

• Introducеd in 2001, it supports invеstor divеrsification and growth stratеgiеs.

• Float-adjustеd markеt capitalisation еnsurеs accuratе rеprеsеntation of publicly tradablе sharеs.
  
  

The BSE Midcap Index highlights India’s fast-growing mid-sized companies with strong potential. Positioned between small-cap agility and large-cap stability, it reflects a balanced investment segment. This index has become essential for investors seeking growth, diversification, and exposure to emerging leaders across various Indian industries.

In this article, we will understand its purpose, selection criteria, calculation method, benefits, and investor relevance today.

What is Midcap?

Midcap refers to “medium capitalisation” and describes companies that fall between large-cap and small-cap categories in terms of market value. Generally, these companies have market capitalisations between ₹5,000 crore and ₹20,000 crore. Most midcap firms are in a phase of active expansion—boosting revenues, widening market presence, and scaling operations to compete with larger players.

What makes midcap companies unique is their hybrid nature. They are not as established and stable as large-cap firms, yet they carry less risk compared to the unpredictable nature of small-cap stocks. Because of this balance, midcap stocks are often preferred by investors looking for a mix of growth potential and moderate risk exposure.

To monitor these stocks, the midcap index serves as a crucial benchmark. It tracks the performance of medium-sized companies across various sectors, offering a broad picture of how this segment is doing. When chosen wisely, midcap stocks have the potential to outperform large-cap stocks in bullish market periods, thanks to their capacity for growth and flexibility in rapidly changing economic environments.

When was the BSE Mid-Cap Index Introduced?

The BSE Midcap Index was officially launched in 2001, aimed at capturing the performance of the most liquid and financially sound mid-sized companies listed on the Bombay Stock Exchange (BSE). Its creation was driven by the growing importance of mid-sized companies in the Indian economy.

Over the years, the index has become a popular benchmark for fund managers, analysts, and retail investors. It plays a critical role in building portfolios that require diversification beyond large-cap exposure.

With the growing investor appetite for differentiated returns, mid-cap indices like this are now followed as closely as other mainstream benchmarks. Interestingly, as India’s GDP and sectors grow, more companies transition from small-cap to mid-cap, and some even to large-cap, making this space dynamic and ever-evolving.

How are Stocks Selected for the BSE Mid-Cap Index?

The selection of stocks in the BSE Midcap Index isn’t random—it follows a well-defined, rule-based methodology to ensure that the index remains relevant and representative of the mid-cap universe.

Here’s how it works:

1. Eligibility: Only stocks listed on the BSE that meet specific minimum criteria regarding liquidity, market capitalisation, and trading frequency are considered.
   
   

2. Market Capitalisation Ranking: Eligible stocks are ranked according to their full market capitalisation.
   
   

3. Selection Band: The index generally includes companies ranked between 101 and 250 by market capitalisation, after excluding those already in the BSE Large Cap Index.
   
   

4. Free Float Adjustments: Only freely available shares for trading (excluding promoter holdings and government shares) are considered using the float-adjusted methodology.
   
   

5. Periodic Reviews: The index undergoes quarterly and semi-annual reviews. Stocks that fail to meet ongoing requirements are replaced with others that better represent the mid-cap sector.
   
   

This process ensures that the BSE Midcap Index remains an accurate barometer of the midcap segment’s health and reflects market sentiment effectively.

How to Calculate Float-Adjusted Market Capitalisation?

Calculating float-adjustеd markеt capitalisation is cеntral to how stocks arе weighted in thе indеx. It еnsurеs that only sharеs availablе for public trading arе considеrеd, еxcluding sharеs hеld by promotеrs, govеrnmеnts, or othеr stratеgic invеstors.

Here's a simple breakdown:

Step 1 – Find Total Market Capitalisation:

Multiply the company’s total outstanding shares by the current market price per share.

Step 2 – Determine Public Float Percentage:

Identify the percentage of shares that are publicly available for trading.

Step 3 – Calculate Float-Adjusted Market Cap:

Apply the formula:

Float-Adjusted Market Cap = Total Market Cap × Public Float %

This gives a truer representation of a company’s market influence. For example, if Company X has ₹10,000 crore in total market cap but only 60% of its shares are publicly traded, its float-adjusted market cap would be ₹6,000 crore.

This method helps investors and index managers better gauge the actual trading potential and real-world value of a company’s stocks in the market.

Midcaps offer a strategic middle ground in the stock market, balancing growth and risk. Understanding the index that tracks them gives investors a clearer picture of potential opportunities. Monitoring this index can serve as a strong foundation for long-term investment decisions.

HDFC Bank Demat Account offers a seamless trading experience. It offers retail investors advanced charting, portfolio management, and real time data to make informed decisions, particularly when navigating through indices like the BSE Midcap.

FAQs

1. What role does the BSE Midcap Index play in portfolio diversification?

It helps investors spread their risk by including mid-sized companies that offer a balance between large-cap stability and small-cap growth.

2. Are dividends considered in the BSE Midcap Index returns?

No, the standard BSE Midcap Index does not factor in dividends. However, there are total return versions that include dividend income.

3. Can international investors invest in BSE Midcap companies?

Yes, through mutual funds, exchange-traded funds (ETFs), or foreign portfolio investment (FPI) routes, international investors can access midcap stocks.

4. How often is the BSE Midcap Index updated?

The index value is updated in real-time during market hours to reflect the ongoing price movements of its constituent stocks.

5. Do all sectors feature in the BSE Midcap Index?

Yes, the index is sector-agnostic. It includes companies from finance, healthcare, IT, manufacturing, and other sectors.

*Disclaimer: Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not an investment recommendation. Investments are subject to market risks and other risks.