Decoding the Nifty Midcap 150 Quality 50: A Midcap Strategy Built on Fundamentals 07Agu2025
(The views expressed here are for information purposes only and should not be construed as a
recommendation or investment advice. While the author is a CFA Charterholder
with nearly 25 years of experience in financial markets, this content
is intended to share general insights and does not constitute financial
guidance. Please consult your financial
adviser before taking any investment decision. Safe to assume the author
has a vested
interest in stocks / investments discussed if any.)
It may be pointed out not all mid-caps are created equal. That’s where indices like the Nifty Midcap 150 Quality 50 come in—designed to separate the solid, fundamentally strong mid-cap companies from the rest.
In this post, we’ll decode what this index really is, how it selects stocks and why it might deserve a spot on your investment radar—especially if you've the risk appetite to tolerate the underlying risks and are looking for quality without venturing too far into the unknown.
In this post, we’ll decode what this index really is, how it selects stocks and why it might deserve a spot on your investment radar—especially if you've the risk appetite to tolerate the underlying risks and are looking for quality without venturing too far into the unknown.
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India Flagship ETFs With Low Fees and Fair Trading Volumes 12Jun2025
Low Expense Ratios, High Returns: Why Passive Funds Matter 06Jun2025
How to Buy Nifty Midcap 150 Index 03May2024
Analysis of Nifty 100 Low Volatility 30 Index 12Sep2023
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2. What is Nifty Midcap 150 Quality 50 Index and How Is It Constructed?
Most of the equity indices in India are from NSE or National Stock Exchange of India Limited. NSE is a premier stock exchange in India, closely followed by BSE Limited.
There are several indices from NSE that give investors exposure to India’s mid-cap space. There are four broad market indices—namely, the Nifty Midcap 150, Nifty Midcap 100, Nifty Midcap 50 and Nifty Midcap Select—each covering different slices of the mid-cap universe.
Alongside these are a few smart beta indices that take a more focused approach. For example, the Nifty Midcap 150 Quality 50 and the Nifty Midcap 150 Momentum 50 aim to filter out mid-cap stocks based on specific factors like quality or momentum, offering a more targeted way to invest in this segment.
Alongside these are a few smart beta indices that take a more focused approach. For example, the Nifty Midcap 150 Quality 50 and the Nifty Midcap 150 Momentum 50 aim to filter out mid-cap stocks based on specific factors like quality or momentum, offering a more targeted way to invest in this segment.
The focus of this article is on Nifty Midcap 150 Quality 50 index.
The Nifty Midcap150 Quality 50 index includes top 50 companies (based on strong fundamentals) from its parent Nifty Midcap 150 index, selected based on their ‘quality’ scores. Here, Nifty Midcap 150 Quality 50 index is called the child index of its parent.
The quality score for each company is determined based on return on equity, financial leverage (except for financial services companies) and earning per share (EPS) growth variability (that is, how stable or erratic a company’s earnings have been) of each stock analysed during the previous five financial years.
The Nifty Midcap150 Quality 50 index includes top 50 companies (based on strong fundamentals) from its parent Nifty Midcap 150 index, selected based on their ‘quality’ scores. Here, Nifty Midcap 150 Quality 50 index is called the child index of its parent.
The quality score for each company is determined based on return on equity, financial leverage (except for financial services companies) and earning per share (EPS) growth variability (that is, how stable or erratic a company’s earnings have been) of each stock analysed during the previous five financial years.
The weight of each stock in the index is based on a combination of stock’s quality score and its free float market capitalisation.
The index doesn’t just pick the largest or fastest-growing mid-caps—it looks for those with consistent earnings, strong return on equity (RoE), low financial leverage and stable profit margins (for more, see Nifty Indices methodology document).
The index doesn’t just pick the largest or fastest-growing mid-caps—it looks for those with consistent earnings, strong return on equity (RoE), low financial leverage and stable profit margins (for more, see Nifty Indices methodology document).
The index is reconstituted semi annually in June and December of each year. Changes are effective from the last trading of June and December. The index is calculated on an end of day basis for all days National Stock Exchange of India is open for trading in equity shares.
3. Fundamentals, Top 10 Stocks and Sectors of the Index
Fundamentals: The index was launched on 24Oct2019, with a base date of 01Apr2005. Its total return in the past one year is minus 3.1 per cent, 5-year annualised return is 20.3 per cent and its return since inception is 18.7 per cent.
One-year volatility (standard deviation) of the index is 16.6 per cent; while 5-year volatility stands at 14.8 per cent (data as on 31Jul2025).
Top 10 Stocks: They include Colgate Palmolive (India), HDFC AMC Ltd, Dixon Technologies (India), Marico and Cummins India. The weights are given in the image attached below.
The top five stocks have a total weight of 17.9 per cent in the index, while the top 10 stocks chip in with a weight of 31.6 per cent. Unlike other indices, like, Nifty 50, Next 50 and Nifty 500 indices, the concentration risk of Nifty Midcap 150 Quality 50 index is much lower (for others, see blog, blog, blog and blog).
But the concentration risk of the so-called smart beta index, namely, Nifty Midcap 150 Quality 50 is much higher compared to its parent index, Nifty Midcap 150.
Top 5 / 10 stocks of select Nifty indices: data 30Jun2025:
Top 10 Sectors: They include Capital goods, information technology, financial services, FMCG and healthcare. The weights are given in the image attached below.
The concentration risk of Nifty Midcap 150 Quality 50 is comparable to other indices. However, it needs to be said that its concentration risk is higher compared to Nifty Next 50; but lower versus Nifty 50.
The top three sectors in the index have a combined weight of 47.3 per cent, with top five contributing 65.6 per cent weight.
Top 3 / 5 sectors of select Nifty indices: data 30Jun2025:
Two screenshots from index factsheet: data as on 31Jul2025 >
Click on the image to view better >
4. Corporate group exposure
One of the important aspects of analysing an equity index is its exposure to various corporate groups in India.
Understanding the exposure of an equity index like the Nifty Midcap 150 Quality 50 to various corporate groups provides crucial insight into its diversification, concentration risk and underlying business strengths.
The analysis reveals nearly 50 per cent of the Nifty Midcap 150 Quality 50 index is exposed to no group in particular, meaning it's made up of independent companies — which can reduce concentration risk (see chart below for data).
Twenty-three per cent of the index's total weight is from MNCs or multi-national corporations, like, Colgate-Palmolive (India), Abbott India and Cummins India.
MNC group is followed by PSUs or public sector underetakings of Govt of India (12.5%), Murugappa group (4.0%) and HDFC group (3.4%).
Groups like Adani, Mahindra and Aditya Birla have no representation, reflecting a selective quality-based screening in the index.
Why MNCs have dominant share in the index?
> the quality-focused screening criteria of the index fits well for MNCs
> MNCs in general score high on financial discipline, return on equity and earnings growth stability
> MNCs have strong brand power, making their earnings more stable and predictable
> they exhibit high degree of resilience during economic downturns
> MNCs in India often operate in stable sectors, like, pharma, consumer and industrial segement of Indian economy
The Nifty Midcap 150 Quality 50 index is not just about size — it’s about financial discipline, earnings consistency and governance. MNCs check these boxes better than many Indian corporate groups, hence their dominant weight.
> the quality-focused screening criteria of the index fits well for MNCs
> MNCs in general score high on financial discipline, return on equity and earnings growth stability
> MNCs have strong brand power, making their earnings more stable and predictable
> they exhibit high degree of resilience during economic downturns
> MNCs in India often operate in stable sectors, like, pharma, consumer and industrial segement of Indian economy
The Nifty Midcap 150 Quality 50 index is not just about size — it’s about financial discipline, earnings consistency and governance. MNCs check these boxes better than many Indian corporate groups, hence their dominant weight.
Break-up of corporate group exposure:
5. Index volatility
How does the volatility, as represented by standard deviation, of Nifty Midcap 150 Quality 50 index stack up against its peers?
Standard deviation measures how much the returns of an equity index (for example, S&P 500 or Nifty 500) deviate from their average (mean) return. Higher standard deviation means greater volatility and higher risk. Lower standard deviation means less volatility and more stable performance.
The index's volatility is lower compared to it parent index, namely, Nifty Midcap 150 -- but higher versus other indices, like, Nifty 50, Nifty 100 Volatility 30 and Nifty 200 Quality 30 (see chart below).
One of the reasons investors turn to quality-focused indices is the potential for lower volatility, especially during uncertain times. Back in 2020, when the COVID-19 outbreak rattled markets, volatility across the board was unusually high—even for traditionally stable segments.
But since then, things have calmed down. As of 31Jul2025, the Nifty Midcap 150 Quality 50 index has shown lower volatility at 16.6 per cent, compared to 18.5 per cent for its parent index, the Nifty Midcap 150.
This suggests that the quality filter may be doing its job—helping reduce risk and probably boosting risk-reward ratio.
But since then, things have calmed down. As of 31Jul2025, the Nifty Midcap 150 Quality 50 index has shown lower volatility at 16.6 per cent, compared to 18.5 per cent for its parent index, the Nifty Midcap 150.
This suggests that the quality filter may be doing its job—helping reduce risk and probably boosting risk-reward ratio.
Volatility for select Nifty indices for the past 7 years >
click on the image to view better >
6. How to Invest in the Nifty Midcap 150 Quality 50?
If you're interested in gaining exposure to this curated basket of high-quality mid-cap stocks, there are a few passive investment options available. As of now, there are just three passive funds in India that track the Nifty Midcap 150 Quality 50 index — one is an ETF and the other two are index funds (see chart below for details).
But here’s the catch — they’re still relatively new and under the radar.
As of 30Jun2025, the combined AUM (Assets Under Management) of all three funds is just around Rs 840 crore, which is quite modest compared to other popular indices.
The ETF, while cost-efficient, suffers from lower trading volumes on the NSE, which could affect liquidity for larger or frequent trades.
All three funds are only about three years old, so they don’t have a long-term performance track record yet — something conservative investors might want to keep in mind.
That said, these funds do offer a simple way to invest in a select group of mid-cap stocks, without having to pick individual stocks or constantly monitor the market. It's your individual choice whether to go for these passive funds, depending on whether you are okay with the relatively small fund size and early-stage nature of these products.
But here’s the catch — they’re still relatively new and under the radar.
As of 30Jun2025, the combined AUM (Assets Under Management) of all three funds is just around Rs 840 crore, which is quite modest compared to other popular indices.
The ETF, while cost-efficient, suffers from lower trading volumes on the NSE, which could affect liquidity for larger or frequent trades.
All three funds are only about three years old, so they don’t have a long-term performance track record yet — something conservative investors might want to keep in mind.
That said, these funds do offer a simple way to invest in a select group of mid-cap stocks, without having to pick individual stocks or constantly monitor the market. It's your individual choice whether to go for these passive funds, depending on whether you are okay with the relatively small fund size and early-stage nature of these products.
1. DSP Nifty Midcap 150 Quality 50 ETF:
Expense ratio: 0.30 per cent
AUM: Rs 106 crore
3-year Sharpe ratio: 0.60 per cent
tracking error: 0.09 per cent
2. UTI Nifty Midcap 150 Quality 50 Index fund:
Expense ratio (direct plan): 0.59 per cent
AUM: Rs 266 crore
3-year Sharpe ratio: 0.50 per cent
tracking error: 0.09 per cent
Expense ratio (direct plan): 0.29 per cent
AUM: Rs 464 crore
3-year Sharpe ratio: NA
tracking error: 0.11 per cent
Comparing Sharpe ratios: Compared to the 3-year Sharpe ratio of UTI Nifty Midcap 150 Quality 50 index fund (0.59), Motilal Oswal Midcap 150 index fund's Sharpe ratio is higher (1.06).
Note: Tracking error data are from India passive funds (this is an NSE website, with a treasure trove of information), while Sharpe ratio data are from Morningstar India.
7. How is the Index's performance?
Nifty Midcap 150 Quality 50 TRI has underperformed its parent index (Nifty Midcap 150 TRI) over the 1-, 3-, and 5-year periods (see chart below).
Quality Under Pressure: But for How Long?
While the quality factor sounds great in theory (and has historically performed well), the recent numbers tell a different story.
As of 31Jul2025, the Nifty Midcap 150 Quality 50 has underperformed its parent index across most time frames. Over 3 years, quality mid-caps have returned 15.4 per cent annualised, compared to a much stronger 24.8 per cent annualised for the broader midcap index.
So why consider it at all?
Because market cycles matter. Quality tends to lag in euphoric bull runs (like we’ve seen in the past three years), where momentum and risk-taking dominate. But during periods of volatility or correction, quality stocks often prove more resilient and recover faster.
If you're investing with a 2-3 year view, there’s some probability that the quality factor could make a comeback—especially if the broader market cools off and fundamentals start to matter more than investor fancy.
Quality Under Pressure: But for How Long?
While the quality factor sounds great in theory (and has historically performed well), the recent numbers tell a different story.
As of 31Jul2025, the Nifty Midcap 150 Quality 50 has underperformed its parent index across most time frames. Over 3 years, quality mid-caps have returned 15.4 per cent annualised, compared to a much stronger 24.8 per cent annualised for the broader midcap index.
So why consider it at all?
Because market cycles matter. Quality tends to lag in euphoric bull runs (like we’ve seen in the past three years), where momentum and risk-taking dominate. But during periods of volatility or correction, quality stocks often prove more resilient and recover faster.
If you're investing with a 2-3 year view, there’s some probability that the quality factor could make a comeback—especially if the broader market cools off and fundamentals start to matter more than investor fancy.
For investors with patience and a focus on long-term consistency, this dip could be an opportunity rather than a red flag.
Signs of a Comeback?
Interestingly, while the longer-term returns for the Nifty Midcap 150 Quality 50 index have lagged behind its parent, the recent 3-month data shows some encouraging signs.
Over the last 3 months (as on 31Jul2025), the Quality 50 index returned 7.3 per cent, not far behind the parent index's 7.7 per cent.
More notably, it outperformed other smart beta peers like:
Nifty 100 Low Volatility 30 (3.3%)
Nifty 200 Quality 30 (2.7%)
This suggests that while quality stocks have been out of favor in recent years, market sentiment might be starting to shift. The index is beginning to participate in the rally again—though not yet leading it.
Signs of a Comeback?
Interestingly, while the longer-term returns for the Nifty Midcap 150 Quality 50 index have lagged behind its parent, the recent 3-month data shows some encouraging signs.
Over the last 3 months (as on 31Jul2025), the Quality 50 index returned 7.3 per cent, not far behind the parent index's 7.7 per cent.
More notably, it outperformed other smart beta peers like:
Nifty 100 Low Volatility 30 (3.3%)
Nifty 200 Quality 30 (2.7%)
This suggests that while quality stocks have been out of favor in recent years, market sentiment might be starting to shift. The index is beginning to participate in the rally again—though not yet leading it.
For investors who believe in mean reversion or want to add a defensive tilt without going ultra-conservative, this early bounce could be a signal worth watching.
The assumption (and possible conclusion) is that quality as a factor may be out of favor recently, but could probably bounce back over the next few years.
The assumption (and possible conclusion) is that quality as a factor may be out of favor recently, but could probably bounce back over the next few years.
Chart showing return comparison of select "smart" beta indices > data as of 31Jul2025
please click on the image to view better >
8. Nifty 200 Quality 30 vs Nifty Midcap 150 Quality 50
If you look beyond just returns, the volatility numbers also tell an interesting story.
While the Nifty Midcap 150 Quality 50 index hasn’t matched the broader midcap index on performance, it has shown reasonably lower volatility—and when you compare it to other quality-focused indices, it stands out more favorably.
The volatility (as of Jul2025) for the Nifty Midcap 150 Quality 50 is 16.6 per cent, which is:
Lower than the parent index’s 18.5 per cent, and
While the Nifty Midcap 150 Quality 50 index hasn’t matched the broader midcap index on performance, it has shown reasonably lower volatility—and when you compare it to other quality-focused indices, it stands out more favorably.
The volatility (as of Jul2025) for the Nifty Midcap 150 Quality 50 is 16.6 per cent, which is:
Lower than the parent index’s 18.5 per cent, and
Comparable or even better positioned on a risk-return basis versus the Nifty 200 Quality 30, which has seen higher drawdowns recently.
Over the past 3 months, the Quality 50 index delivered 7.3 per cent, outperforming Nifty 200 Quality 30 (2.7 per cent), while maintaining moderate volatility.
In other words, if you’re looking for quality exposure with a relatively balanced risk profile in mid-caps, the Nifty Midcap 150 Quality 50 offers a more compelling combination of recent returns and reasonable volatility than the Nifty 200 Quality 30 (for data, see volatility and return charts in Section 5 and 7 respectively above).
9. Valuation of the index and its comparison
All data are as of 31Jul2025 and its source is Nifty Indices.
a) Nifty Midcap 150 Quality 50:
PE ratio: 36.7
PB ratio: 9.2
dividend yield: 1.31%
PE ratio: 33.8
PB ratio: 4.9
dividend yield: 0.84%
3) Nifty 100 Low Volatility 30:
PE ratio: 31.2
PB ratio: 5.8
dividend yield: 1.50%
4) Nifty 200 Quality 30:
PE ratio: 28.3
PB ratio: 8.6
dividend yield: 2.43%
Valuation: Quality Comes at a Price
Parent vs child: As of 31Jul2025, the Nifty Midcap 150 Quality 50 index is trading at a PE of 36.7 and a PB of 9.2, clearly indicating a premium valuation. But how does this stack up against its peers?
Compared to its parent, the Nifty Midcap 150 (PE of 33.8, PB of 4.9), the Quality 50 index is notably more expensive. That’s not surprising, investors seem to be paying more for the perceived safety and consistency of quality mid-caps.
Parent vs child: As of 31Jul2025, the Nifty Midcap 150 Quality 50 index is trading at a PE of 36.7 and a PB of 9.2, clearly indicating a premium valuation. But how does this stack up against its peers?
Compared to its parent, the Nifty Midcap 150 (PE of 33.8, PB of 4.9), the Quality 50 index is notably more expensive. That’s not surprising, investors seem to be paying more for the perceived safety and consistency of quality mid-caps.
Interestingly, despite the higher valuation, the dividend yield is also better (1.31% vs. 0.84%), which suggests these companies aren’t just expensive—they’re also more shareholder-friendly.
Quality 50 vs Quality 30: When placed alongside another "smart" beta peer,the Nifty 200 Quality 30, the contrast sharpens.
Quality 50 vs Quality 30: When placed alongside another "smart" beta peer,the Nifty 200 Quality 30, the contrast sharpens.
The Quality 50 commands a much higher PE (36.7 vs. 28.3) and slightly higher PB, but offers a lower dividend yield (1.31% vs. 2.43%). This could mean that the market expects faster earnings growth from mid-cap quality stocks, but it also raises the bar for performance.
In short, quality mid-caps aren’t cheap right now, but if the market environment starts favoring fundamentals over momentum and if you expect mid-cap stocks earnings will continue to outperform their large-cap peers, these valuations could still prove justifiable—especially for long-term investors.
In short, quality mid-caps aren’t cheap right now, but if the market environment starts favoring fundamentals over momentum and if you expect mid-cap stocks earnings will continue to outperform their large-cap peers, these valuations could still prove justifiable—especially for long-term investors.
10. Final thoughts
The Nifty Midcap 150 Quality 50 index offers an interesting lens into a slice of the market that blends mid-cap growth potential with fundamentals for those who want exposure to quality mid-caps.
It’s a relatively young and lesser-known smart beta index, and while it has underperformed its parent index in recent years, signs of a potential rebound have started to show—particularly in the last quarter.
From a volatility standpoint, it is a via media between broad-based mid-cap indices and large-cap quality strategies, offering a reasonable risk-reward profile. And while valuations are currently elevated, this may reflect expectations of stronger fundamentals or future growth.
There are only a handful of passive funds tracking this index at present, with modest AUM (assets under management) and limited liquidity in the ETF option. That said, it provides an accessible route for investors who wish to explore mid-cap quality as a theme—without stock-picking.
As always, anyone looking at this or any index strategy should consider it in the context of their own goals, risk tolerance and asset allocation.
From a volatility standpoint, it is a via media between broad-based mid-cap indices and large-cap quality strategies, offering a reasonable risk-reward profile. And while valuations are currently elevated, this may reflect expectations of stronger fundamentals or future growth.
There are only a handful of passive funds tracking this index at present, with modest AUM (assets under management) and limited liquidity in the ETF option. That said, it provides an accessible route for investors who wish to explore mid-cap quality as a theme—without stock-picking.
As always, anyone looking at this or any index strategy should consider it in the context of their own goals, risk tolerance and asset allocation.
This isn’t investment advice. Even though the author is a CFA Charterholder with nearly 25 years of experience in the financial markets, this is just general insight—not a recommendation.
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References and additional data:
NSE market watch - DSP Nifty Midcap 150 Quality 50 ETF (for volume and traded value data)
iNAV data (indicative NAV or intra-day NAV) summary of DSP MF ETFs including DSP Nifty Midcap 150 Quality 50 ETF
Nifty Midcap 150 Quality 50 Index factsheet - PDF for Jul2025
India Passive funds DSP Nifty Midcap 150 Quality 50 ETF
India Passive funds DSP Nifty Midcap 150 Quality 50 Index fund direct plan
Screener.in Nifty Midcap 150 Quality 50 - individual stocks, returns and their valuation ratios are available
DSP MF - DSP Nifty Midcap 150 Quality 50 ETF - NFO product presentation
NSE data - DSP Nifty Midcap 150 Quality 50 ETF- volumes and traded value data for the past two months as on 07Aug2025 >
DSP Nifty Midcap 150 Quality 50 Index fund - portfolio of 50 stocks as on 31Jul2025 >
Additional data: NSE Index Dashboard: 31Jul2025:
Two screenshots: Nifty Broad indices, sectoral indices and strategy indices >
Two screenshots with raw data on several smart beta indices >
All weblinks related to passive funds (ETFs + index funds) from NSE / Nifty indices >
NSE Market Watch - Exchange Traded Funds / ETFs (to check price / volumes)
Nifty indices - market data - ETFs or exchange traded funds (to check price)
NSE market watch - all Nifty indices (incl broad based, sectoral, etc) - to check index level, % change, 52-week high and 52-week low
Nifty Indices - NSE Indices factsheets / indexogram - monthly
Nifty Indices - Research papers of Nifty indices
Nifty Indices Index methodology - PDF for Jun2025 - the PDF gives details of which sectors / sub-sectors form part of a particular index -- for example for, financial services index, capital markets index, etc.
Nifty Passive insights - quarterly (incl archives)
India passive funds - NSE website - both NSE and BSE
Nifty indices Index dashboard - monthly (returns and risk) - Jul2025 PDF
Nifty Indices broad based indices - equity
Nifty Indices sectoral indices - equity
Nifty Indices thematic indices - equity
Nifty Indices return profile (incl total return, historical return)
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Disclosure: I've got a vested interest in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if any.
Disclaimer: The analysis and
opinion provided here are only for information purposes and should not be construed
as investment advice. Investors should consult their own financial advisers
before making any investments. The author is a CFA Charterholder with a vested
interest in financial markets.
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