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NIFTY SMLCAP 100
The Nifty Smallcap 100 is a stock market index in India that is part of the NSE (National Stock Exchange) and is designed to represent the performance of the small-cap segment of the Indian equity market. Small-cap companies are typically those with smaller market capitalization when compared to larger companies. The Nifty Smallcap 100 index comprises 100 small-cap stocks from various sectors, and it is a subset of the broader Nifty indices.
The Nifty Smallcap 100 index provides investors and market participants with a way to track the performance of smaller, less-established companies in the Indian stock market. These companies often have higher growth potential but also come with higher risks compared to larger, more established companies.
The Nifty Smallcap 100 index, like other Nifty indices, is created using a free-float market capitalization-weighted methodology, which implies that the index components are weighted based on the market value of their free-floating shares. This method assures that shares that are more actively traded and publicly available have a bigger effect on the index's value.
Indicators such as the Nifty Smallcap 100 are often used by investors and traders to get insights into the performance of small-cap stocks, make investment decisions, and analyse the overall health and trends of the Indian stock market. It might be a valuable benchmark for small-cap fund managers and investors who are interested in this market area. Please keep in mind that the index's composition may vary over time as firms move into and out of the small-cap category depending on their market capitalization.
The Nifty Smallcap 100, like other Nifty indices, follows specific selection criteria to determine the constituents of the index. The criteria for inclusion in the Nifty Smallcap 100 are as follows:
Market Capitalization: To be included in the index a company's market capitalization must be in the small-cap range. This indicator is calculated by multiplying a company's stock price by the number of outstanding shares. While the exact range varies, it typically reflects firms with lesser market capitalization than those in the Nifty 50 or Nifty 500.
Liquidity: Companies considered for the Nifty Smallcap 100 should have a minimum level of liquidity, which is typically assessed based on the average daily trading volume and the frequency of trading on the stock exchange. This criterion ensures that the stocks included in the index are actively traded and readily available for investors.
Listing and Trading History: Eligible firms must have at least one listing and trading history on the National Stock Exchange. This criterion ensures that the firms in the index have been publicly traded for a particular amount of time, which makes them more solid and established.
Sector Representation: The Nifty Smallcap 100 aims to provide a diversified representation of sectors and industries. As a result, criteria are in place to guarantee that firms from all industries are included in the index. This assists investors in developing a well-balanced and diverse portfolio.
Financial Viability: To be considered for inclusion in the index, companies must fulfil specific financial viability standards. This may include variables like as profitability, financial stability, and regulatory compliance.
Eligibility Review: The NSE evaluates the Nifty Smallcap 100 components on a regular basis and may make modifications to the index depending on changes in market circumstances and individual company performance. Companies that no longer match the qualifying requirements or have expanded to the point that they fall into a new market cap category may be replaced with more eligible candidates.
It's important to note that the specific criteria and their exact values can change over time to adapt to evolving market conditions. The NSE, along with the index committee, regularly reviews and updates the criteria to ensure that the Nifty Smallcap 100 accurately represents the small-cap segment of the Indian equity market.
The Nifty Smallcap 100, like other stock market indices, has several key characteristics that define its nature and purpose. Here are some of the key characteristics of the Nifty Smallcap 100:
Small-Cap Stocks: The Nifty Smallcap 100 primarily consists of small-cap stocks. These are firms with lower market capitalizations than larger ones. Small-cap stocks often reflect smaller firms with the potential for more growth, but they are also associated with greater risk and volatility.
Diversification: The index aims to provide diversification by including companies from various sectors and industries. This diversification helps reduce concentration risk, ensuring that the performance of the index is not overly dependent on a specific sector.
Market Capitalization Weighted: The Nifty Smallcap 100 index is weighted by market capitalization. This implies that the market value of each index constituent's free-floating shares determines their weight in the index. Larger companies within the index have a greater influence on its performance.
Representativeness: The index tries to represent the performance of the Indian stock market's small-cap section. It is used to track the success of smaller, less-established enterprises in the market.
Liquidity and Accessibility: Companies included in the Nifty Smallcap 100 are required to meet certain liquidity criteria, ensuring that their stocks are actively traded and readily available to investors. This enhances the accessibility of the index for both institutional and retail investors.
Review and Reconstitution: The composition of the index is subject to periodic reviews and reconstitution. Companies that no longer meet the eligibility criteria or that have grown beyond the small-cap range may be replaced with more suitable candidates. This ensures that the index remains relevant and representative of the current small-cap market.
Investment Benchmark: The index is frequently used as a benchmark for small-cap mutual funds, exchange-traded funds, and other financial products. It is used by fund managers to measure the performance of their portfolios and make investment choices.
Higher Volatility: Because of their smaller size and limited liquidity, small-cap stocks are more volatile than large-cap stocks. Consequently, the Nifty Smallcap 100 is likely to experience more significant price fluctuations compared to broader market indices like the Nifty 50.
Growth Potential: Investors in the Nifty Smallcap 100 are typically looking for exposure to companies with higher growth potential. Small-cap companies have the capacity to expand and increase their market share, making them attractive to investors seeking capital appreciation.
Risk and Return: Small-cap stocks carry higher risk but also the potential for higher returns. Investors in the Nifty Smallcap 100 should be prepared for greater price volatility and fluctuations in their investments.
These characteristics collectively define the Nifty Smallcap 100 as an index that tracks the performance of smaller, growth-oriented companies in the Indian stock market, offering investors opportunities for diversification and potential rewards along with increased risk.
The Nifty Smallcap 100 is a significant benchmark in the Indian stock market, representing the dynamic and high-potential world of small-cap companies. Its key characteristics, including diversification, market capitalization weighting, and regular reconstitution, make it an invaluable tool for investors and fund managers seeking exposure to smaller, often growth-oriented businesses. The performance of the index represents the distinctive risk-return trade-off associated with small-cap companies, which promise larger profits but also more volatility.
Investors use the Nifty Smallcap 100 to assess portfolios and market trends, and it encourages investment in smaller enterprises, crucial to India's economic growth. Despite higher volatility than larger indices, it's vital for diversification and capitalizing on small enterprises' growth potential in India.
The Nifty Smallcap 100 index is designed to reflect the behaviour and performance of the small capitalised segment of the financial market. The Nifty Smallcap 100 index comprises of 100 tradable, exchange listed companies.
The Nifty Smallcap 100 index aims to provide investors with potentially higher returns over the long-term by tapping into the growth potential of these smaller but promising companies at lowest cost. However, small cap companies are incredibly volatile, and investors can see losses in short to medium term. Therefore, the Nifty Smallcap 100 index involves a high risk and high reward trade-off for investors.
The Nifty Smallcap 100 index represents about 5% of the free float market capitalization of the stocks listed on NSE as on September 29, 2023. The total traded value for the last six months ending September 2023, of all index constituents is approximately 9.5% of the traded value of all stocks on NSE. Therefore, the Nifty Smallcap 100 index contributes to the overall health and trends of the Indian stock market by reflecting the performance of the small cap segment, which is often considered as a proxy for the economic growth and innovation potential of the country.
The Nifty Smallcap 100 index adapts to technological advancements and disruptive innovations within the small-cap space by periodically rebalancing its portfolio based on the latest market capitalization and liquidity criteria of the companies. The index also follows a quality-based approach to select the companies that have a positive net worth, positive earnings per share, and a minimum trading frequency of 90%.
The performance of Nifty small-cap fund depends on the specific fund that tracks the Nifty Smallcap 100 index. According to the web search results, there are several funds that invest in the Nifty Smallcap 100 index, such as HDFC NIFTY Smallcap 250 ETF, DSP Nifty Smallcap250 Quality 50 Index Fund, and others. The returns of these funds may vary depending on their expense ratio, tracking error, portfolio composition, and other factors. You can compare the performance of different Nifty small-cap funds on various websites.
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