Stock Market Investment 2019: Which one would you prefer Large, Mid or Small Cap Stocks ?


Stock Market Investment 2019, large,mid and small cap stocks
Stock Market Investment 2019, large, mid and small cap stocks


New year resolution is a very common tradition, particularly in western culture, nowadays it's common in India also. Similarly in the stock market also recently many investors must have made a resolution for their Investment in 2019 to get a high return.

For smart investment, it is very essential to know the art of allocating funds for safety and high return. You need to be very clear and focused before allocation of funds in the terms of Liquidity also otherwise you will be stuck for the long term. Once you are clear of these, it would be very easier for you to allocate fund in various categories of stocks.

What are Nifty 50 Large, Mid and Small Cap Stocks


If you are planning to add fresh investment or want to churn your portfolio you need to have knowledge of these three categories, now let us step forward and understand the details of three categories of stock. The categories are mainly classified based on Market Capitalization of stocks, known as
  1. Large Cap Stocks
  2. Mid Cap Stocks
  3. Small Cap Stocks
The Cap used in all the above three categories means "Capitalization" and the word "Market Capitalization" means Current Stock Price x number of Shares Outstanding. Based on current market capitalization stocks are classified into Large-cap, Mid-cap, and Small-Cap. It actually provides the valuation of the companies.

Large-Cap Stocks:


These are the stocks of well-established companies that have a strong presence for many years. These category stocks are like "Mr. dependable" where your investment would be safe. You can get all the information on Tv, newspaper, and internet. The market capitalization of these companies is very high above Rs 20000 Cr.

Mid-Cap Stocks:


These category stocks are between Large cap and small-cap stocks, the market capitalization of these category companies are between Rs 5000 cr to Rs20000 Cr. Mid-caps companies are relatively riskier than the large-cap company stock, but it has tremendous scope for growth and high return in 3-4 yrs of time. Unlike large-cap companies, a lot of information on these companies are not available to the public that is why it is very difficult to judge the stock.

Small-Caps Stocks:


These are kind of start-up or developing companies where risk and return both are high. The market capitalization of these companies is below Rs 5000 Cr. The information of these companies is not available to the public. Small-caps are often stated to be a platform to make a big return like multi-bagger in short span of time.    

The performance of Nifty 50 Large, Mid and Small Cap Stocks in 2018 


The performance of Nifty large, mid and small cap was not at all impressive last year. Nifty 50 gained only about 3 percent during the year whereas Midcap and Small Cap were down more than 12 and 30 percent respectively. We have already discussed the reason why the market was volatile and returns are low in the last year in our previous article Stock Market Flashback 2018 




The main reason for Mid-Cap and Small-Cap heavy correction in 2018 was due to 


1. Reintroduction of Long-term capital gain tax (LTCG) in the market at Budget

2. Mutual Fund Reclassification: SEBI asked mutual funds to group their equity scheme under large medium and small caps based on market capitalization and cut down their number of schemes. After this rule was introduced fund managers were busy realigning their portfolio and trying to get out of illiquid stocks without causing too much damage to the fund performance.

3. Introduction of Additional Surveillance Measure (ASM): SEBI started maintaining a list of stock updating on monthly basis for ASM which are highly volatile in 3 months and imposed additional margin for those stocks. This step is basically to save investors from the volatile market. Those stocks are mostly in Mid and Small cap category.  

4.Introduction of Physical Settlement in derivative segment. SEBI has selected 46 scrips in the derivative segment and made a different settlement for those scrips. If those scrips are not settled on expiry a compulsory delivery will be done after expiry day. After this rule investor trying to avoid this kind of mid-cap stocks.

5. Nifty 50 stocks were in a heavy correction in 2018 for various reason like high Crude Oil Price, Rupee depreciation against the dollar, Election result, Trade War, Nuclear War threat etc When Nifty 50 gets corrected Mid and Small caps also affected, so investors avoided Mid and Small cap stocks last year.

Which one you would Prefer Nifty 50 Large, Mid or Small Cap Stocks


In 2019 market experts are betting on Mid-caps and Small caps stocks. You must have come across with blog post or articles on business portal regarding boom on Mid and Small caps in 2019. But now the question is which one you would prefer Large, Mid or Small Cap stocks. Actually, it all depends on your

1. Your Investment capacity
2.  Risk-taking capacity
3. The time frame of your Investment.

For e.g, if you can take a high risk you can prefer Mid and Small caps Stocks whereas low-risk profile should go for Large Cap stocks.

Another e.g if your time horizon is less then 2/3 years it's better to prefer large cap but if your time frame is 5/8 years then can go for potential Mid and Small cap stocks.


You may also like our article: Is your money lying idle at Bank Account? Here's what you should do

Conclusion:

It is always advisable to allocate fund as per your risk taking capacity keeping in mind the safety and liquidity of your investment. You can also allocate your fund in all three categories at the same time proportionately as per your risk appetite.


Also read our article: How to choose a Stock Broker for Investment


If you like our blog post, please share with others.


Happy Investing!

Finogyan Team


Stock Market Investment 2019: Which one would you prefer Large, Mid or Small Cap Stocks ? Stock Market Investment 2019: Which one would you prefer Large, Mid or Small Cap Stocks ? Reviewed by Finogyan on January 08, 2019 Rating: 5

1 comment:

  1. Nice blog for learning share market and trading. I like to read this blog everyday.
    Trade India Research

    ReplyDelete

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