For a long time, large-cap stocks were seen as the safe bet, but now mid-cap stocks are growing fast. This is because of things like the economy getting better, helpful government policies, and more people investing in India.
As things change in the market, lots of investors are paying attention to these smaller companies, hoping for stable returns. This article is all about why mid-cap stocks are on the rise and why they might be a smart choice for your portfolio.
Performance Trends of large-cap and mid-cap stocks
In 2024, mid cap stocks in India were doing way better than large-cap ones. The Nifty Midcap 100 saw huge jumps, with both rising by around 28%, while the Nifty 50 only grew by 13%.
This trend continued into December 2024, as mid-cap indices rose by 0.6%, while the benchmark Nifty 50 index declined by about 2%.
These gains were largely driven by strong domestic liquidity and increased retail investor activity, highlighting the growing interest in mid-cap stocks.
Factors Contributing to Mid-Cap Stocks’ Growth
Mid-cap stocks in India have been getting more attention lately, and they’re often doing better than large-cap stocks. There are a few reasons why this is happening. Let’s take a look.
1. Economic Growth and Policy Support
India’s economy is growing fast, and the government is doing a lot to help mid-sized companies.
With more focus on building things like roads, digital technology, and factories, these companies are finding new opportunities.
On top of that, programs like “Make in India” and “Startup India” are making it easier for people to start businesses and get money from investors. This has made things even better for mid-cap companies, helping them grow and succeed.
2. Sectoral Shifts
Mid-cap companies in India are increasingly prominent in sectors such as pharmaceuticals, technology, and consumer goods. For instance, mid-cap pharmaceutical companies are poised for long-term growth due to India’s expanding healthcare needs and the increasing export of generic drugs.
In the technology sector, mid-cap firms are capitalizing on the global demand for IT services, contributing to their growth. Similarly, mid-cap companies in the consumer goods sector are benefiting from rising domestic consumption and changing consumer preferences.
These sectoral shifts are enabling mid-cap to catch up with large-cap stocks in India.
3. Growth Potential
Investors often look for mid-cap stocks because these companies are growing fast. They’re in the middle of expanding and want to grab a bigger share of the market.
Take Central Depository Services (India) Ltd. (CDSL) as an example. In December 2024, its stock price hit a 52-week high of ₹1,865.40.
The rise in CDSL share price shows that the company is doing well and investors believe in its future. This kind of growth makes mid-cap stocks appealing to those looking for better returns.
4. Diversification Benefits
Diversification means spreading your investments across different types of assets to lower risk. Adding mid-cap stocks to your portfolio can help with this because they offer growth opportunities that large-cap stocks may not provide.
This approach balances the stability of large-cap stocks with the potential for higher returns from mid-cap stocks. It can lead to better overall returns while managing risk.
But, it’s important to evaluate each investment carefully to ensure it fits your financial goals and how much risk you’re willing to take.
Conclusion
Mid-cap stocks in India are growing faster than large-cap stocks because of strong economic growth, supportive government policies, and more local investments. This gives investors a chance for better returns, but it also comes with more risk. So, if you’re thinking about investing, make sure to check how much risk you’re comfortable with.
