Article

Mid Cap Stock
June 07 , 2012

The size of a company is defined by its market cap (number of outstanding shares * share price). Mid cap refers to an intermediate size in terms of market cap, compared to all listed shares in the Indian market. Mutual funds that have a mandate to hold only such shares in their portfolio are called mid cap funds.

The precise cut-off to determine a mid cap may vary. But we will use a market cap of between Rs 1000 crore – Rs 5000 crore to define mid-cap stocks. 

A mid cap stock usually has certain features:

  • It is less liquid than large cap stocks. This though mainly affects large institutional investors, not much the retail
  • Due to lower liquidity and less stability than a larger companies, mid cap stocks often have lower PE ratios than larger ones in a comparable industry

That said, the possibility of finding multi-baggers is higher in this space than in the large cap space. Thus, overall, mid cap stocks are riskier, but can provide higher returns than large caps.

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