What is the Nifty SmallCap 250 Quality 50 Index?
The Nifty Smallcap 250 Quality 50 Index is a stock market index that tracks the performance of the top 50 small-cap stocks in India that have been selected based on their quality scores. The quality score is a measure of a company's financial strength and profitability. It is calculated using a variety of factors, including return on equity, debt-to-equity ratio, and Earnings-per-Share (EPS) variability of every stock that is determined over a period of 5 years.
Highlights of Nifty SmallCap 250 Quality 50 Index:
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The Nifty SmallCap 250 Quality 50 Index was launched in April 2005 by the National Stock Exchange of India (NSE).
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It is a strategy index that includes stocks from the Nifty Smallcap 250 Index and ranks them based on their quality score.
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The quality score of each small-cap stock is calculated by considering its free-float market capitalization.
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The index is designed to track the performance of 50 high-quality small-cap stocks in the Indian market.
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The weight assigned to each stock in the index is determined by a combination of its market capitalization and quality score.
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The constituent stocks of the index are reviewed and changed twice a year, in June and December, during the reconstitution of the Quality 50 index.
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The Nifty SmallCap 250 Quality 50 Index aims to provide investors with exposure to fundamentally strong and well-performing small-cap companies.
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It is one of the important benchmarks for investors looking to assess the performance of high-quality small-cap stocks in India.
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The index's constituents are subject to periodic review and adjustments to ensure it reflects the changing market dynamics and company performance.
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Performance of Nifty Smallcap 250 Quality 50 vs. Other Indices
If you had invested Rs. 1 Lakh in the Nifty Smallcap 250 Quality 50 in 2013, today it would have been Rs. 7.15 Lakh (7.2X)
Follow is the performance of the index over the years:
| As on 31th July 2023 |
3 Years |
5 Years |
10 Years |
| Nifty Small Cap 250 Quality 50 |
39% |
17% |
22% |
| Nifty Small Cap 250 |
33% |
13% |
20% |
| NSE MidCap 100 |
31% |
16% |
18% |
| Nifty 50 |
21% |
12% |
13% |
[Source: nseindia.com]
Which are the Constituent Stocks of the Nifty Smallcap 250 Quality 50?
The current 50 stocks as of 23 July, 2023, for the Nifty Smallcap 250 Quality 50 Index are as follows:
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TTK Prestige Ltd.
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KRBL Ltd.
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Balaji Amines Ltd.
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Galaxy Surfactants Ltd.
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Ratnamani Metals & Tubes Ltd.
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Can Fin Homes Ltd.
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Cochin Shipyard Ltd.
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Vaibhav Global Ltd.
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Radico Khaitan Ltd.
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Polyplex Corporation Ltd.
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Engineers India Ltd.
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Praj Industries Ltd.
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Metropolis Healthcare Ltd.
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Zensar Technolgies Ltd.
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Orient Electric Ltd.
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Birlasoft Ltd.
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KPIT Technologies Ltd.
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RHI Magnesita India Ltd.
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Central Depository Services (India) Ltd.
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Mastek Ltd.
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CCL Products (I) Ltd.
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Redington Ltd.
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Godfrey Phillips India Ltd.
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DCM Shriram Ltd.
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KRBL Ltd.
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Jamna Auto Industries Ltd.
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Gujarat Pipavav Port Ltd.
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Aarti Drugs Ltd.
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Mahanagar Gas Ltd.
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Carborundum Universal Ltd.
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Avanti Feeds Ltd.
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Century Plyboards (India) Ltd.
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Finolex Industries Ltd.
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Godfrey Phillips India Ltd.
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NOCIL Ltd.
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Transport Corporation of India Ltd.
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KEI Industries Ltd.
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CCL Products (I) Ltd.
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RITES Ltd.
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Finolex Cables Ltd.
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JP Chemicals & Pharmaceuticals Ltd.
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Castrol India Ltd.
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PCBL Ltd.
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DC Shriram Ltd.
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Cochin Shipyard Ltd.
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TCI Express Ltd.
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Top 10 Small Cap Companies on Nifty 250 Index by Weightage
Here is the individual weight of the top 10 small-cap companies featured on the Nifty Smallcap 250 Quality 50 index as of July 31, 2023:
| Stock Name |
Weight (%) |
| Indian Energy Exchange |
4.40% |
| Castrol India Ltd. |
4.22% |
| Sonata Software Ltd. |
4.11% |
| Central Depository Services (India) |
3.82% |
| KEI Industries Ltd. |
2.94% |
| National Aluminium Co. Ltd. |
2.89% |
| Redington Ltd. |
2.77% |
| J.B. Chemicals & Pharmaceuticals Ltd. |
2.63% |
| Carborundum Universal Ltd. |
2.61% |
| Sanofi India Ltd. |
2.61% |
[Source: nseindia.com]
The Nifty Smallcap 250 Quality 50 index ensures that the weight of each individual small-cap stock remains below 5%, effectively reducing concentration risk for any index fund or exchange-traded fund (ETF) following this strategy index.
People Also Read: Nifty Midcap 150
What Are the Sectors Included on Nifty Smallcap 250 Quality 50 Index?
The index is composed of stocks from a variety of sectors. The sectors included as of July 31, 2023, are:
| Sector |
Weightage (%) |
| Capital Goods |
19.89% |
| Information Technology |
12.47% |
| Financial Services |
11.84% |
| Oil, Gas & Consumable Fuels |
8.95% |
| Chemicals |
8.71% |
| Fast Moving Consumer |
8.52% |
| Healthcare |
7.68% |
| Consumer Durables |
6.47% |
| Services |
5.86% |
| Construction |
3.83% |
| Metals & Mining |
2.89% |
| Textiles |
2.61% |
[Source: nseindia.com]
The maximum weightage of about 19.89% for the index is distributed towards the capital goods sector, as of July 31, 2023. The minimum exposure of Nifty Smallcap 250 Quality 50 Index is towards textiles stocks that accounted for only around 2.61% of the index.
The index is a good option for investors who are looking for growth potential and diversification.
What Are the Returns of Nifty Smallcap 250 Quality 50?
As of July 31, 2023, the Nifty Small-cap 250 Quality 50 has returned 19.46% since its inception. This is significantly higher than the returns of the broader market, which has returned 15.75% over the same period.
Below are the returns of this index:
| Investment Period |
Returns (%) |
| 1 year |
29.14% |
| 5 year |
18.03% |
| Since Inception |
19.46% |
[Source: nseindia.com]
The strong returns of the Nifty Small-cap 250 Quality 50 are due to a number of factors, including the outperformance of small-cap stocks, and the strong performance of the quality companies that make up the index.
People Also Read: ICICI Prudential Nifty Midcap 150
Is Nifty SmallCap 250 Quality 50 Index Fund a Smart Investment?
Investing in Nifty SmallCap 250 Quality 50 Index Fund small-cap stocks in India can be a smart investment strategy for individuals with a high degree of risk tolerance and a long-term investment horizon. Small-cap stocks refer to the equity shares of companies ranked 250th or lower in terms of free-float market capitalization. They offer significant growth potential due to the relatively small size of these companies.
These companies often have a greater opportunity for growth compared to their larger counterparts. As they expand their operations and tap into new markets, their stock prices can experience substantial appreciation, leading to significant gains for investors.
However, it's essential to acknowledge that small-cap stocks are accompanied by a higher level of volatility, especially in the short term. The lower liquidity and market capitalization make them more sensitive to market fluctuations, economic changes, and company-specific developments. Consequently, small-cap stocks can experience wild price swings, leading to potential short-term losses for investors.
It is recommended to stay invested for a time period of at least 5 years or longer to maximize the potential returns from these investments. Over the long run, the growth potential of small-cap stocks can outweigh the short-term fluctuations and generate attractive returns for patient investors.
Investors should carefully assess their risk tolerance and investment goals before allocating funds to small-cap stocks.
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Nifty Smallcap 250 Quality 50 Index Methodology
The Nifty Smallcap 250 Quality 50 Index follows a robust methodology for the selection and inclusion of stocks to ensure a high-quality representation of small-cap companies. Here are the key points outlining the methodology:
Eligibility Criteria:
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Non-F&O (Futures and Options) stocks within Nifty Smallcap 250 index are ineligible if the instances of the stock hitting the upper or lower circuit (price band) during the past 6 months as of the cut-off date are equal to or more than 20% of the total trading days over the same period.
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Companies having a percentage of pledged promoter shares greater than 20% are not included in the index.
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Bottom 10 percentile stocks based on the Value score, 6-month average daily turnover, and high volatility are also excluded from the index.
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High-Quality Score Selection:
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The top 50 stocks with the highest quality score within the eligible universe are chosen for inclusion in the Nifty Smallcap 250 Quality 50 Index.
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The quality score of each stock is derived by multiplying the square root of the free float market cap with the quality score of that stock.
Index Rebalancing and Reconstitution:
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The Nifty Smallcap 250 Quality 50 Index is rebalanced and reconstituted on a semi-annual basis in June and December.
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Data for rebalancing and reconstitution is based on the last trading day of May and November, respectively.
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Four weeks’ notice is given to the market before implementing any changes.
Index Governance:
A professional team manages all NSE indices, including the Nifty Smallcap 250 Quality 50 Index.
The governance structure consists of three tiers:
The Nifty Smallcap 250 Quality 50 Index methodology focuses on selecting high-quality small-cap companies while considering factors such as trading activity, promoter share pledges, and market capitalization. Investors looking for exposure to promising small-cap companies with strong fundamentals may find the Nifty Smallcap 250 Quality 50 Index an attractive option for their portfolios.
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Step 1: Visit the Policybazaar website or app and create an account/login if you haven't already.
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Step 3: Provide necessary information like city, age, name etc.
Step 4: Compare different plans based on their performance, ratings, and other relevant details.
Step 5: Choose the Max Life Insurance plan to avail the benefits of the Small Cap Fund.
Step 6: Click on "Invest Now" and follow the on-screen instructions to complete the purchase.
Step 7: Provide the necessary KYC details and complete the payment process.
Step 8: After successful payment, you'll receive a confirmation of your purchase.
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