what is a Mid-cap company?
Companies are classified based on their market capitalisation as large-cap, mid-cap and small-cap. An Indian company with a market capitalization between Rs.5000 crores and Rs.20000 crores are considered as a midcap company. As the name indicates mid-cap company falls in the middle of the pack between large-cap and small-cap companies.
However, the classification based on market capitalisation is also subject to a company’s rank in the benchmark indices such as Sensex and Nifty. For instance, the companies which are listed from 101st – 250th in the Nifty Index are usually considered as mid-cap companies. Nifty also has a benchmark mid-cap index in India called the Nifty Midcap 50 which hosts the top 50 most traded mid-cap stocks in the market.
Features of mid-cap
Mid-cap shares lie on a wide range, bordering both small-cap and large-cap stocks. Some mid-cap companies might be nearing developmental stage, and thus, might offer greater stability instead of returns; whereas some companies might have recently graduated from small-cap and therefore allow greater returns compared to stability.
Chance of growth:
Most of the mid-cap companies in India have a high potential to increase their profitability, productivity, and market share. Such companies may bring the investors huge profit overnight.
Mid-Cap Company stocks respond with lower intensity to market volatility as compared to small-cap companies. But they give less stability in the bearish market as compared to large-cap companies.
Mid-cap stocks are more liquid as compared to small-cap stocks. Mid-cap stocks are investor’s all-time favourite stocks!
Advantages of mid-cap stocks
Ease of growth: Mid-cap companies in India have a better future of raising finance through credit. It has the power to enhance their potential for growth and expansion.
Return potential: most of the mid-cap companies are in the middle and stable stage of development. These stocks have a high chance of value appreciation. It provides substantial dividends to the investors
Information on the company: mid-cap companies provide information on their current financial status and financial history. It is easier to analyse companies from a mid-cap stocks list. From theses, information investors can understand the growth potential and profitability of the stocks.
Disadvantages of mid-cap
Value Trap: If a company consistently operates in low profits with limited cash flow for a long time, this stage is known as a value trap. Mid-cap companies, especially the low ranking ones, are prone to value trap.
Inadequate resources: Mid-cap companies are likely to have less efficient managerial and organisational infrastructure than large-cap companies. They are usually less equipped than large-cap companies.