Kotak Institutional Equities raises concerns over the reliability of the Nifty Midcap 150 as a long-term benchmark, citing its mechanical construction and sector-skewed performance, which could impact investor decisions and comparative analysis.
Kotak Institutional Equities has argued that mid-cap benchmarks are too fluid to offer a reliable long-term yardstick, saying the Nifty Midcap 150’s construction makes historical comparisons less meaningful. The brokerage said the index is shaped by a mechanical, rules-based process that changes as share prices move and companies rise or fall in market value, which can distort sector representation and muddle earnings and valuation comparisons over time.
The Nifty Midcap 150 tracks 150 companies ranked 101 to 250 by full market capitalisation from the Nifty 500 universe, and NSE data show that it accounted for about 18.18% of the free-float market capitalisation of NSE-listed stocks as of 30 March 2026. Kotak’s point is that a benchmark built on a narrow slice of the market can swing quickly as sentiment shifts, allowing favoured sectors to dominate while weaker ones become under-represented.
In its analysis, Kotak said only 46 stocks stayed in the index continuously from FY22 through the first half of FY27, while 275 unique names appeared in the basket during FY22-FY26. It also said that around 27 stocks accounted for more than half of the index’s performance in any half-year period between H1FY22 and H2FY26, underscoring how a relatively small group of constituents can drive returns. The firm added that 41 former mid-cap stocks moved up to the Nifty 50 or Nifty Next 50, while 129 slipped into the Nifty Smallcap 250 or left the index universe altogether.
Kotak’s caution comes after a strong run for mid- and small-cap shares in earlier periods, when the Nifty Midcap 150 rose 97% between March 2023 and September 2024, with gains broad-based across sectors. Since then, the index has been largely flat, aside from a sharp rally from April-May 2026, the note said. Passive products tied to the benchmark remain in the market: Kotak’s own Nifty Midcap 150 ETF and index fund both track the benchmark, with recent portfolio disclosures showing banks, pharmaceuticals and biotechnology, and capital markets among the largest sector weights.
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