What are mid cap stocks?

Mid cap stocks refer to shares of companies that fall within the 101 to 250th position based on market capitalisation among the companies listed on the stock exchange. In other words, the companies have a moderate market cap and their stocks tend to have a higher return potential than large cap stocks and typically a lower risk than small cap stocks.

Factors to consider before investing in mid cap stocks

Mid cap stocks, by definition, fit between large cap and small cap stocks in terms of potential growth opportunities and level of risk. Here are the factors you must consider before investing in them:

Higher volatility: Investing in mid cap stocks entails higher volatility and market risk than large cap investments. Investors should be prepared to withstand short-term price fluctuations and exercise patience during periods of market turbulence.

Liquidity concerns: Mid cap stocks may exhibit lower liquidity compared to large cap stocks, posing challenges in terms of buying and selling them, especially during volatile market conditions.

Business risk: Mid cap companies may face greater business risk including regulatory changes, operational challenges, and macroeconomic uncertainties as compared to large cap ones. Investors should do comprehensive research on such companies before investing.

Who should invest in mid cap stocks?

Now that you know what mid cap stocks mean, you may be wonder if they are suitable for you. Consider investing in mid cap stocks if you are a:

Opportunities in mid cap stock investing

After examining at what mid cap stocks are, here’s a look at the opportunities in mid cap investing. Here are a few of them:

Emerging sectors: Mid cap stocks in India often represent companies operating in emerging sectors with significant growth potential. They present opportunities to identify undervalued stocks.

Diversification: Mid cap stocks offer diversification benefits for investors seeking to build well-rounded investment portfolios by complementing their large cap and small cap holdings with mid cap stocks.

Potential for outperformance: Mid cap companies can capture emerging opportunities, which positions them favourably to potentially deliver higher investment returns, through with greater risk.

Conclusion

Mid cap stocks are those that have a moderate market capitalisation. Typically, they tend to offer higher returns than large cap stocks but can be more volatile than them. They are also considered less risky than small cap stocks. They could be a good fit for a risk-tolerant investor seeking potential capital appreciation over a long horizon. However, it is recommended that you consult a financial advisor before making any investment decision.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.

  • Growth-oriented investor who wants to tap into the potential for capital appreciation over the long term.
  • Risk-tolerant investor who can withstand short-term price volatility and navigate market uncertainties.
  • Long-term investor with a focus on wealth accumulation.
  • Diversified portfolio seeker who wants to complement their large cap and small cap holdings.
  • Value investor who finds value in mid cap stocks trading at attractive valuations relative to their growth prospects.