Is Nifty LargeMidcap 250 index the best way to have exposure to large and mid cap stocks? Here's all you need to know

Investors should follow asset allocation and diversify their investment portfolio across various asset classes, such as equity mutual funds, fixed income, gold, etc. Within the equity asset class also, there should be further diversification within large, mid, and small cap stocks. The Nifty LargeMidcap 250 index allows you to invest in large and mid cap stocks through a single scheme.

What is this index, and should you invest in it? Let us explore. What is the Nifty LargeMidcap 250 index? The Nifty LargeMidcap 250 index represents the portfolio of India’s top 250 companies. It includes the top 100 large cap companies that are a part of the Nifty 100 index and the top 150 mid cap companies that are a part of the Nifty 150 Midcap index.

The aggregate weight of large and mid cap stocks is 50% each. The weights are reset quarterly. From every Rs. 100 you invest, Rs. 50 gets allocated towards the 100 large cap companies and the remaining Rs. 50 is allocated towards 150 mid cap companies. Thus, investing in the Nifty LargeMidcap 250 index gives you equal exposure to large and mid cap companies.

Also Read: Sectoral composition of the Nifty LargeMidcap 250 The Nifty LargeMidcap 250 is a diversified index with constituents spanning across most sectors of the economy. Table: Sectoral composition of Nifty LargeMidcap 250 index The table above shows how the Nifty LargeMidcap 250 index has 27.74% representation of financial services and 9.06% of IT sector.

In comparison, the Nifty 100 index is concentrated, with more than 45% representation of these two sectors. Also, the capital goods and healthcare sectors have a little over 15% representation in the Nifty LargeMidcap 250 index. In comparison, these two sectors are under represented in the Nifty 100 index with a little over 5% exposure.

Overall, the Nifty LargeMidcap 250 index has constituents from 20 sectors compared to the 17 sectors in the Nifty 100 index. Thus, the Nifty LargeMidcap 250 index has a broader representation of most sectors of the economy. Also, the weights of various sectors are more evenly balanced, except for the financial services sector, which has a higher weight.

Also Read: How has the Nifty LargeMidcap 250 index performed? The Nifty LargeMidcap 250 index is a balanced fit between the Nifty 100 and the Nifty Midcap 150 indices. Over the years, it has given better returns than the Nifty 100 index, but lower than the Nifty Midcap 150 index. The above table shows how the Nifty LargeMidcap 250 index has outperformed the Nifty 100 index consistently in terms of returns.

While the returns are lower than the Nifty Midcap 150 index, the annualised volatility and return risk ratio of the Nifty LargeMidcap 250 index are also lower. Should you invest in the Nifty LargeMidcap 250 index? If you want equal exposure to large and mid cap stocks through a single scheme, you may consider investing in the Nifty LargeMidcap 250 index.

In the past, largecaps have usually given stable returns with lower volatility. During market falls, largecaps fall lower than midcaps. However, during times of economic recoveries and bull runs, midcaps tend to outperform largecaps. Historically, the returns of this index have ranged between the returns of large and mid cap indices as shown in the above table.

During market falls, the index fall has been lower than the mid cap index. During recoveries and bull runs, the index returns have been better than large cap index. Thus, the Nifty LargeMidcap 250 index combines the features of large and midcaps in a single scheme. Also Read: How can you invest in the Nifty LargeMidcap 250 index? Currently, two AMCs offer 3 index funds for investing in the Nifty LargeMidcap 250 index.

These include: a) Edelweiss Nifty LargeMidcap 250 Index Fund b) Zerodha Nifty LargeMidcap 250 Index Fund c) Zerodha ELSS Tax Saver Nifty LargeMidcap 250 Index Fund As the name suggests, the Zerodha ELSS Tax Saver Nifty LargeMidcap 250 Index Fund is an Equity Linked Savings Scheme (ELSS). It offers a deduction from taxable income.

The maximum deduction allowed in a financial year is the amount invested or Rs. 1,50,000, whichever is lower. It has a 3 year lock in period. Livemint tops charts as the fastest growing news website in the world to know more. Unlock a world of Benefits! From insightful newsletters to real time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away!.