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Are mid cap stocks a better buy right now than large cap ones?

Created by : Jyoti Rath, Sr. Associate, Barclays  | 06 28 2010 13:03:12 +0000
Industry : Equity Research/AnalyticsFunctional Area : Equities(Markets)
Keywords : mid cap stocks large cap stocks
Activity:  203 views;  last activity : 07 06 2010 20:18:09 +0000

The Bombay Stock Exchange's (BSE) mid-cap and small-cap companies have beaten the blue-chip firms in the current fiscal so far by growing as much as 6% compared to the broader market Sensex.

The investors are getting good returns from the small- cap and mid-cap stocks that is why they have shifted from the frontline Sensex stocks. This is a trend generally when the frontline stocks are in consolidation phase the investors flock towards stocks which are available at low cost. The mid-cap and small-cap indices look after the performance of companies with market capitalisations that are a fifth or tenth of that of blue chip firms.

So users, are mid cap stocks a better buy right now than large cap ones?

  
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The valuation gap between the mid-cap, small-cap firms and large-cap was significant. The improvement in the economic conditions and hence corporate performance, made the small and mid-cap asset class an attractive bet, thus aiding them to outperform the large caps. So I feel mid cap stocks are better buy right now than large cap ones.
By Jyoti Rath, Sr. Associate, Barclays  06 28 2010 13:03:12 +0000
 
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It depends on how you pick up your stocks. Our economic performance considering the present state of affairs elsewhere had been good, though those events will make the market litle cautious.

It is wiser to study the companies, those that are stable in midcaps and small cpas are good buys. Stable means those that has high reserves, low p/e less than say 28 and had a good performing year last.

 
By Mathew Cherian, Research Associate/Analyst, Western Michigan University  | 07 04 2010 17:41:44 +0000
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Yes,  Mostly Large cap stock are already performed well whereas small and mid cap stock are underperformed as compared to large cap.... So it is better option to invest in small and mid cap sector to get more return..
By Vipin Bhasin, Private Equity/Hedge Fund/VC-Manager, Indian Investment Co.  | 06 29 2010 20:16:27 +0000
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Thanks for sharing this Jyothi Sir. Even during the slowdown many mid and low caps out performed large caps by considerable margin. If you see the comparative advantage sustainable, go for more exposure.


By Padmanabhan R, Articled / Audit assistant, Finance student  | 06 28 2010 18:59:42 +0000
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The type of stock which is better buy it depends of the risk and return factor but it always been influenced by the investor psychology
By Vivekanand , Senior Consultant (Economic & Rural Research) SAARC Nations, United Nations Development Programme  | 06 28 2010 13:22:52 +0000
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