MBSL revises Midcap Index

In a pioneering move, MBSL constructed a stock market index: the ‘MBSL Midcap Index’, which measures the aggregate price level and price movements of medium size companies listed on the Colombo Stock Exchange (CSE).

The All Share Price Index (ASPI) measures the share price movements of all the stocks listed on the CSE while the Milanka Price Index (MPI) measures the price movement of highly capitalized companies listed on the CSE.

There was no index to measure the price movement of medium sized companies listed on the CSE. The MBSL Midcap Index filled this vacuum. MBSL Midcap Index can be used as the benchmark index by individual and institutional investors who prefer growth but are prepared to withstand only conservative levels of volatility in their equity investments.

It can be used as the benchmark index for the introduction of Midcap linked index funds.

The Midcap Index, together with the Milanka Price Index (MPI) generate valuable signals for portfolio managers for switching between larger-cap more sensitive stocks and the midcap less sensitive stocks with more growth potential in response to changing capital market conditions.

The Midcap Index focus in profitability helps to screen stocks with better future prospects that will cross to higher market capitalization in the next year. The Merchant Bank of Sri Lanka PLC revised its MBSL Midcap Index from January 1, 2012.The index which was launched in 1999 is revised annually.

The criteria for selecting the twenty-five stocks of the index remained unchanged and are: Middle Range Market Capitalization, Liquidity and Profitability.

The range for market capitalization for the year 2011 was Rs 2,394 billion - Rs 23.94 billion. With the stock market activity, this range is adjusted for the change in the ASPI annually. Accordingly the range of market capitalization for the year 2012 would be Rs 2.24 billion - Rs 22.4 billion.