{"id":5185,"date":"2021-10-19T17:48:25","date_gmt":"2021-10-19T12:18:25","guid":{"rendered":"https:\/\/www.tickertape.in\/blog\/?p=5185"},"modified":"2021-10-19T17:48:25","modified_gmt":"2021-10-19T12:18:25","slug":"mid-cap-stock","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/mid-cap-stock\/","title":{"rendered":"Mid Cap Stocks Guide 2021 \u2013 Overview, Benefits and Why You Should Invest"},"content":{"rendered":"\n<p><a href=\"https:\/\/www.tickertape.in\/blog\/top-10-midcap-stocks-india\/\">Mid-cap stocks<\/a> are stocks of companies that belong to the mid-cap capitalisation category. According to <a href=\"https:\/\/www.tickertape.in\/blog\/securities-and-exchange-board-of-india-functions-powers-and-regulations-of-sebi\/?utm_source=blog&amp;utm_medium=article\">SEBI<\/a> categorisation, companies with a market cap above Rs. 5,000 cr but less than Rs. 20,000 cr qualify as mid-cap companies. Let us delve into the concept and look at the advantages and risks of investing in mid-cap stocks.<\/p>\n\n\n\n<p>This article covers:<\/p>\n\n\n\n<ul><li><a href=\"#what\">What are mid-cap stocks?<\/a><\/li><li><a href=\"#factors\">Factors to consider before investing in mid-cap stocks<\/a><\/li><li><a href=\"#risks\">Risks of investing in mid-cap stocks<\/a><\/li><\/ul>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/mid-cap-stock\/#What-are-mid-cap-stocks\" title=\"What are mid-cap stocks?\">What are mid-cap stocks?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/mid-cap-stock\/#Factors-to-consider-before-investing-in-mid-cap-stocks\" title=\"Factors to consider before investing in mid-cap stocks\">Factors to consider before investing in mid-cap stocks<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/mid-cap-stock\/#Growth\" title=\"Growth \">Growth <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/mid-cap-stock\/#Management-quality\" title=\"Management quality\">Management quality<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/mid-cap-stock\/#Competitive-advantage\" title=\"Competitive advantage\">Competitive advantage<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/blog\/mid-cap-stock\/#High-margin\" title=\"High margin\">High margin<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tickertape.in\/blog\/mid-cap-stock\/#Risks-of-investing-in-mid-cap-stocks\" title=\"Risks of investing in mid-cap stocks\">Risks of investing in mid-cap stocks<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tickertape.in\/blog\/mid-cap-stock\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\" id=\"what\"><span class=\"ez-toc-section\" id=\"What-are-mid-cap-stocks\"><\/span>What are mid-cap stocks?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The word \u2018mid-cap\u2019 refers to companies and stocks that sit between the large-cap and small-cap categories. Mid-caps are companies with a <a href=\"https:\/\/www.tickertape.in\/blog\/market-capitalization\/?utm_source=blog&amp;utm_medium=article\">market capitalisation<\/a> of more than Rs. 5,000 but less than Rs. 20,000 cr. <a href=\"https:\/\/www.tickertape.in\/blog\/market-capitalization\/\">Market capitalisation<\/a> in simple terms refers to the aggregate <a href=\"https:\/\/www.tickertape.in\/blog\/market-value\/\">market value<\/a> of the company, which is obtained by multiplying its outstanding shares with the current stock price.<\/p>\n\n\n\n<p>As companies&#8217; market value increases or decreases through time, the capitalisation category they belong to also shifts in line.&nbsp;<\/p>\n\n\n\n<p><a href=\"https:\/\/www.tickertape.in\/blog\/securities-and-exchange-board-of-india-functions-powers-and-regulations-of-sebi\/\">SEBI<\/a> (<a href=\"https:\/\/www.tickertape.in\/blog\/stock-exchanges-in-india\/?utm_source=blog&amp;utm_medium=article\">Securities Exchange Board of India<\/a>) further defines the classification according to a company&#8217;s position in <a href=\"https:\/\/www.tickertape.in\/blog\/sensex-and-nifty\/\">benchmark indices<\/a>. Enterprises that are listed between 101st and 250th on the <a href=\"https:\/\/www.tickertape.in\/indices\/nifty-index-.NSEI?utm_source=blog&amp;utm_medium=article\" target=\"_blank\" rel=\"noreferrer noopener\">Nifty Index<\/a> are termed mid-cap companies. The Nifty Midcap 50 is a benchmark mid-cap <a href=\"https:\/\/www.tickertape.in\/blog\/stock-market-index\/\">index<\/a> that includes the top 50 most actively traded mid-cap equities in India.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"factors\"><span class=\"ez-toc-section\" id=\"Factors-to-consider-before-investing-in-mid-cap-stocks\"><\/span>Factors to consider before investing in mid-cap stocks<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Growth\"><\/span>Growth <span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The two most essential drivers in long-term returns are revenue and earnings growth. Revenue growth is an important aspect, but so is operational growth. Because of their greater growth potential on both the top and bottom lines, stocks of mid-cap companies, more often than not, exhibit better performance than large-cap and small-cap firms.&nbsp;<\/p>\n\n\n\n<p>Diwali 2021 brings another <a href=\"https:\/\/www.tickertape.in\/blog\/muhurat-trading-2021\/?utm_source=blog&amp;utm_medium=article&amp;utm_campaign=mtrad\">Muhurat Trading<\/a> session. Before investing in the stocks blindly, you can do your bit of research and screen mid-cap stocks on <a href=\"https:\/\/www.tickertape.in\/?utm_source=blog&amp;utm_medium=article\" target=\"_blank\" rel=\"noreferrer noopener\">Tickertape<\/a>. Use this to create your wishlist for Muhurat Trading.\u00a0\u00a0<\/p>\n\n\n\n<p>Mid-cap stocks are generally quick to respond to economical\/ financial events than large caps and are more financially solid than small caps, giving them the edge for yielding good returns.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Management-quality\"><\/span>Management quality<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>When investing in mid-cap stocks, it is paramount to consider the management quality and efficiency. The bonus may be on investors to ensure that management has the skill and bandwidth to take the business to the next level. Due to the under-researched nature of mid-cap companies (by brokerages and research firms), stricter due diligence may be required.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Competitive-advantage\"><\/span>Competitive advantage<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>One of the easiest methods to spot a solid mid-cap stock is to look for a competitive advantage. As the business grows, it may stay competitive by providing better services and goods. Competitive advantage can come in the form of a better product or a lower price.&nbsp;<\/p>\n\n\n\n<p>It is also crucial to have a price edge. A price setter frequently receives the first-mover advantage, allowing it to lead the rise while the rest of the market follows. It is preferable to follow the pack leader rather than a laggard.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"High-margin\"><\/span>High margin<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Another criterion for picking strong mid-cap companies is to look for ones with high <a href=\"https:\/\/www.tickertape.in\/blog\/margin-requirements\/?utm_source=blog&amp;utm_medium=article\">margins<\/a>. Companies may command high margins due to a lack of competition or having a moat, better operational efficiency, or because they have a dominant position in the industry. Watch for such strong fundamentals before investing in mid-cap stocks.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"risks\"><span class=\"ez-toc-section\" id=\"Risks-of-investing-in-mid-cap-stocks\"><\/span>Risks of investing in mid-cap stocks<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Around market peaks, mid-cap stocks and funds can be pretty volatile. There is a high possibility that mid-cap companies are either unduly reliant on a single line of business or are overly reliant on a small number of clients. With regard to stock price, given the relatively smaller <a href=\"https:\/\/www.tickertape.in\/blog\/market-capitalisation-meaning\/\">market capitalisation<\/a> compared with <a href=\"https:\/\/www.tickertape.in\/stocks\/collections\/largecap-stocks?utm_source=blog&amp;utm_medium=article\">large-cap<\/a> companies, the stocks tend to react quickly to market events.<\/p>\n\n\n\n<p>Primary risks to consider while investing in mid-cap stocks:<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/www.tickertape.in\/blog\/volatility\/\">Volatility<\/a><\/strong>: Mid-caps are extremely sensitive to any market movements or events. They are <a href=\"https:\/\/www.tickertape.in\/blog\/high-beta-stocks\/?utm_source=blog&amp;utm_medium=article\">high beta stocks<\/a> and thus have an inherent risk of being volatile. When market valuations are soaring and markets are volatile, mid-caps tend to be more prone to price shocks. Mid-cap stocks are generally more volatile than large-cap stocks.\u00a0<\/p>\n\n\n\n<p><strong>Liquidity: <\/strong>Liquidity refers to the ease of buying or selling an investment quickly. Mid-cap stocks tend to have less liquidity as the demand for their stocks may be limited than larger-cap stocks.\u00a0<\/p>\n\n\n\n<p><strong>Lack of resilience<\/strong>: Mid-caps have limited resources at their disposal. Their infrastructure and management may not be comparable to that of large caps. Furthermore, any significant economic change or financial bubble can leave the company struggling to sustain itself.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Midcap stocks are of companies that command a market cap between Rs. 5,000 to Rs. 20,000 cr. While the potential for capital appreciation is higher in mid-cap stocks compared with large-cap stocks, the risk is also higher in line. A little amount of exposure to mid-cap equities is, however, required for a well-balanced portfolio. Before investing in a mid-cap stock, do your homework on the firm and only <a href=\"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/\">invest<\/a> if you can digest market fluctuations.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Wondering what are mid-cap stocks? Click here to get information on mid-cap stocks, factors to consider before investing, risks involved and reasons to invest.<\/p>\n","protected":false},"author":45,"featured_media":5189,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[9,1749],"tags":[881,880],"acf":[],"modified_by":"Manonmayi","jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2021\/10\/Pink-Know-more-1.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/5185"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/45"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=5185"}],"version-history":[{"count":3,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/5185\/revisions"}],"predecessor-version":[{"id":17305,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/5185\/revisions\/17305"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/5189"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=5185"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=5185"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=5185"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}