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You must already be aware of the major stock indexes in India like the SENSEX and NIFTY. But this is not all. In order to track different types of companies, various indexes have been introduced based on market capitalization, industries, sectors, etc. BSE Mid-cap is one such index that has been segmented on the basis of market capitalization.
S&P BSE Mid-cap has been designed to track the performance of the mid-cap companies in India listed on the stock exchange. Unlike, SENSEX and BSE 100, BSE mid-cap index today does not track large-cap companies. It constitutes and tracks the performance of the mid-cap industries. The values of the index are float-adjusted. In other words, only the shares readily available for trading in the market are included. It represents 15% of the total market cap of S&P BSE AllCap after the large-cap index.
The index values keep changing with the change in BSE mid-cap share prices. Any shares that are privately held are not included in the index. The price of privately held shares or shares still in their lock-in period does not have any impact on the share price and thus the index value. In order to reflect an accurate index value, only shares available for trading are considered while choosing the stocks to be included in the BSE mid-cap index.
Currently, there are 107 stocks on the stock exchange, and the total market cap stands at INR 3,507,359.65 cr. The quantity of constituents in the S & P BSE mid-cap index remains variable. 1989-90 is used as the base year for calculating the index value.
The BSE Mid-cap index was first introduced on April 11, 2005, in order to track the movement in the price of companies belonging to the mid-cap segment. Although the BSE 500 index includes mid-cap companies, the index value gets biased and is affected by the presence of large-cap stocks. Therefore, it was determined to introduce a new index that will solely track only the mid-cap stocks.
As a result, two new indices, BSE mid-cap and BSE small-cap were introduced in order to track the performance of relatively lower market-cap companies. BSE Mid-cap index today is rebalanced every year in September month and reviewed every quarter in December, March, and June. The values are calculated in real-time. The index is calculated in two currencies, INR and USD. The companies that have a market cap of 5000 cr. - 20,000 cr. belong to the mid-cap category.
Before 2003, all the stock indexes were calculated using the full capitalization method. Under this method, all the shares, whether tradeable or not, were considered while making the calculation. In 2003, it was realised that full market capitalization does not represent a true picture, and a new method called float-adjusted market capitalization was introduced. S&P BSE mid-cap index today is calculated using this method.
Step 1: The first step is to calculate the market capitalization by multiplying the BSE mid-cap share price with the number of shares.
Step 2: The next step is to find the percentage of shares that are available for trading.
Step 3: Now, multiply the figure calculated in Step 1 by the percentage found in Step 2 to find float-adjusted market capitalization.
Here’s an example -
Club Mahindra has 10 lakh shares in the market, out of which 80% are freely tradeable. Let’s assume the market price of the stock is INR 1000. Here’s how it is calculated -
| Total Shares in Market for Club Mahindra | A | 10 lakhs |
| Market Price per Share of Club Mahindra | B | INR 1000 |
| Total Market capitalization | C = A*B | INR 100 Crores |
| Free-float factor (80%) | D | 0.8 |
| Free-Float Market capitalization | E = C*D | INR 80 Crores |
The float-adjusted market cap is calculated individually for all companies and added. Further, it is divided by the market cap of the base year i.e. 1989-90, and multiplied by 100.
Here’s the formula -
BSE Mid-Cap Today = (Total Free-Float Market capitalization) / (Base Market capitalization) x 100
