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Best Mid-Cap Stocks for Long Term Investment

10 June 2022

Midcap stocks are stocks of companies that are not as large as the blue-chip companies but not as small as the micro-cap companies. They have an average market capitalization of between 100 crores and 2,000 crores. Midcap stocks are riskier than large caps or small caps but offer higher returns.

There are a few reasons why investors prefer midcaps over large caps and small caps. The first reason is that the valuation gap between the two types of stocks is very high at times, which makes it easier for midcap stocks to outperform their peers.

The second reason is that there are fewer institutional investors in the midcap space, which means they have less competition when it comes to buying shares at a discount. The third reason is that midcap companies tend to be more nimble than their larger counterparts and can adapt better when needed.

Best Mid Cap Stocks For 2022 India

S.No.

Company Name

Industry

1.

Crompton Greaves 

Household Appliances

2.

Polycab India

FMEG

3.

Relaxo Footwears

Footwear

4.

Escorts

Commercial Vehicles

5.

Deepak Nitrite

Commodity Chemicals

Factors To Consider Before Investing In Mid-Cap Stocks 

When you're looking for a solid investment, it's important to consider the factors that make a stock's performance more predictable. Here are a few things to consider before investing in mid-cap stocks:

  • Financial Goals

You should consider your financial goals before investing in any best midcap stocks for long term. This will help you decide what kind of stocks are best suited for you. For example, if your goal is to invest for growth and long-term returns, then mid-caps would be a good option for you.

On the other hand, if your goal is more short-term and conservative, then you may want to invest in large caps instead.

  • Investment Horizon

Mid-cap stocks are volatile because they do not have as many investors as large caps or small caps do. Therefore, if you plan on selling them within a year or so after buying them, then it may be wise not to invest in them at all because their value can fluctuate significantly during this time period due to a lack of liquidity.

However, if you are planning to go for the best mid cap stocks to buy for long term and looking for long duration of investments that can grow over time without having to pay much attention to daily fluctuations in price then this may be a good option for you since they tend not to fluctuate as much over time due to more liquidity being available from more investors purchasing shares throughout various markets across India.

  • Liquidity

In the case of mid-cap stocks, liquidity is a major consideration. Liquidity refers to the ease with which you can sell a security without affecting its price. The greater the liquidity of a stock, the more easily you can sell it without affecting its price.

To find out if a company is liquid enough, you should look at the current stock market capitalization, volume, and a number of outstanding shares.

  • Transparency

A company's transparency is another factor to consider before investing in mid cap stocks for long term in India. Transparency refers to how transparently the company operates and reports its finances.

You should always check if the company has an independent auditor and publishes regular financial statements on its website or elsewhere online so that you can see how well it's doing financially.

  • Returns

You should also look at what kind of returns are expected from investing in mid-cap stocks as compared to other types of investment like small-cap or large-cap investments.

  • Peer Comparison

Compare your investment plan against those of other companies in similar industries or markets. You want to be sure that what makes sense for one company also makes sense for another company in the same industry—that way, if something unexpected happens with one company's operations (such as an earthquake), it doesn't affect both of them equally adversely.

  • Your Financial Health

One of the most important things to consider when choosing the best mid cap stocks For 2022 is your financial health. Mid-cap stocks are more volatile than large caps, which means they can experience wild swings in value in short periods of time. You should only consider investing in a mid-cap stock if you have enough money set aside to cover any losses you might incur.

  • Fund Performance

Fund performance is another important factor to consider when choosing a mid-cap stock. A fund's past performance is not always indicative of its future performance, but it can give you some insight into what kind of returns you could expect if you invested with them.

Also, keep in mind that funds are often managed by multiple managers who contribute their own strategies and ideas for picking stocks—this can lead to some variability in how well certain funds perform compared with others from the same company or family of funds.

Best Performing Midcap Stocks: Past Performance

1) Crompton Greaves

Crompton Greaves Consumer Electricals Limited is an India-based consumer electrical company. The Company operates through two segments: Electrical Consumer Durables (ECD) and Lighting. It manufactures and distributes a range of consumer products ranging from fans, pumps, and appliances in the ECD segment and a full range of lighting products. 

2) Escorts

Escorts Limited is an India-based engineering company. The Company offers solutions for agriculture, infrastructure, and railways. The Company operates through four segments: Agri Machinery, Construction equipment, Railway equipment, and Auto ancillary products. 

3) Relaxo Footwears

Relaxo Footwears Limited is engaged in the manufacturing and trading of footwear and related products. It manufactures a range of slippers, sandals, casuals, and sports and casual shoes for men, women, and kids. Its brands include Relaxo, Sparx, Flite, Bahamas, Maryjane, and Kids Fun. The Company manufactures and sells a range of synthetic Ethylene Vinyl Acetate (EVA) products. 

4) Polycab India

Polycab India Limited is engaged in the business of manufacturing and selling wires and cables, and fast-moving electrical goods (FMEG) under the POLYCAB brand. It operates through three segments: Wires & Cables, Fast moving electrical goods (FMEG), and others. Its Wires & Cables segment manufactures and sells electric wires and cables.

5) Deepak Nitrite

Deepak Nitrite Limited is a chemical manufacturing company. The Company's segments include Basic Chemicals, Fine & Speciality Chemicals, Performance Products, and Phenolics. The Basic Chemicals segment offers sodium nitrite, sodium nitrate, nitro toluidines, fuel additives, and nitrosyl sulphuric acid. The Fine & Speciality Chemicals segment offers xylidines, oximes, cumidines, and specialty agrochemicals.

Conclusion

Midcap stocks have a lot more potential than an average stock in India. They not only get traded at a higher price compared to their peers but also provide greater returns. The mid-cap companies are somewhat smaller than the blue-chip companies, but still much larger than the small-cap stocks.

Midcap companies are often described as "self-funding" by their management teams, which means that they have achieved a certain level of profit, where ongoing growth requires less or no external capital from investors.

Disclaimer: The views expressed in this post are that of the author and not those of Groww.

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Research Analyst - Bavadharini KS 

Disclaimer

The stocks mentioned in this article are not recommendations. Please conduct your own research and due diligence before investing. Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. NBT do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.
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