What are mid cap stocks?

Mid cap is the short form for "middle capitalization stocks". Capitalization is derived by multiplying the number of outstanding shares by the current market price.

Say for example, company A has 1 crore outstanding shares and the current market price is Rs 100. Then we would say that the company's market capitalization is Rs 100 crores.

So, mid cap stocks would have a lesser capitalization then the large cap stocks. For example, on the National Stock Exchange some of the mid cap listed stocks are Allahabad Bank, Andhra Bank , Bharat Forge, CESC, Dish TV, Crompton Greaves, HDIL, IDBI Bank, Jain Irrigation, JSW Steel, Reliance Capital, Sun TV, Sintex and several other stocks that make for the NSE Mid Cap 50.

Large caps on the other hand have a larger market capitalization. If mid caps have a market cap of Rs 5000 crores, then a large cap stocks would have a larger capitalization then these. All of the BSE Sensex 30 stocks are large cap stocks and all of the S&P CNX Nifty stocks are large cap stocks.

For example, Reliance Industries, ICICI Bank, L&T, Mahindra and Mahindra, Bajaj Auto, Bharti Airtel, Hindalco, HUL, ITC, TCS, Infosys, Maruti, State Bank of India etc., are all large cap stocks along with other stocks that form part of the Sensex and Nifty.

Large cap stocks are generally favored by the institutional investors, including domestic and foreign funds. Large cap stocks can be easily sold and bought as the volumes in these stocks are generally very high and liquidity is good.

Mid cap stocks on the other hand are preferred by investors and traders alike. The price volatility in these stocks can be generally high, which is why they are a trader's delight. These set of stocks also offers traders the chance to make and lose money, which is why they are preferred for intra-day trades.

GoodReturns.in