Mid-cap companies are emerging and undergoing high growth. It is in a place between big capital and low capital companies where there is better growth from big companies and less risk than small companies.
The business of mid-cap companies is emerging and they are going through a period of high growth. It is in a place between large capital and low capital companies, where there is better growth from big companies and less risk than small companies. Generally, enterprises in this period of their business give the best growth and the highest profit. In such a situation, there is an opportunity for us to mark the winner of tomorrow and join his success story. In this way, midcap companies or midcap companies have been creating great assets over a long period of time.
The Indian economy has undergone several structural reforms in the last 4 years, including demonetization, insolvency code, GST, RERA and reduction of corporate tax. These have significantly affected the way many businesses operate. During the last 10 years, some sectors and industries have gone into a severe downturn. These changes have impacted mid-cap companies and this impact has been much greater than that of established and large companies. After aligning with the new environment, these mid-cap companies are now moving towards recovery.
According to the standard indices of large companies, mid-cap companies are going through a low to excellent performance. Usually a period of poor performance is followed by a period of great performance. Mid-cap companies are now in the phase out of a 3-year underperformance phase and we expect them to do well over the next 3 to 5 years.
In the polarization of the markets, we see that some stocks and sectors of midcap are giving very high profits, while there are a large number of stocks and sectors which are not doing well in the market. While a few select midcap companies have outperformed from mid-2018 to 2020, the majority of midcap companies have not outperformed on the Nifty Midcap 100 index and are available at attractive valuations. This deviation is giving us a better chance of choosing shares.
Among mid-cap companies, our focus is on emerging high growth potential sectors, companies gaining market share in large enterprises or companies gaining strong market position, companies in the organized sector, self-reliant India and infrastructure creation. The beneficiary of the policies is on the companies.
This year’s budget has also indicated growth and we are seeing that after about 12 years, the phase of earning growth is coming back. We will also focus on companies that are becoming part of cyclical sectors and are trading at attractive valuations.
In this way, we find that there are all reasons for mid-cap companies to remain sustainable during the next 3 to 5 years. Mid-cap companies are now coming out of the worst phase of poor performance of 3 years compared to companies with large capital. The valuation of stocks of all mid-cap companies, especially in more cyclical sectors, is below their long-term average. With the hope of improving the Indian economy, the prospects of earning growth are also improving.
In this way, mid-cap companies today are offering the double benefit of excellent growth in earnings and above the long-term average from the level below the long-term valuation. In this way, we believe that investing in mid-cap companies will provide better profits in the medium and long term. The next 5 years can be profitable without risk and it is providing a great opportunity for wealth creation.
Disclaimer: Before taking any kind of investment, take the opinion of your financial planner. CueCrowd will not be responsible for any profit and loss after investment.
(The views published are personal to the author.)