2015 has not been a great year for markets, by any stretch of imagination. Indian markets, which were euphoric at the start of the year, due to hopes of a robust reform agenda by the Narendra Modi government, have generated negative returns so far.

As we write the passage of the GST Bill in the winter session looks extremely difficult, so does the bankruptcy code. The Land Acquisition Bill has already gone for a toss.

Mid cap and small caps have generated good returns in select pockets for investors. As we head into 2016, the question is which cap stocks we should invest. So, here is the answer to small cap vs mid cap vs large cap investment.

Small cap stocks are stocks that have a small market capitalization. Here is a select list of small cap stocks.

Mid cap stocks including stocks that have a slightly higher market capitalization than small cap stocks.

List of select mid cap stocks

The large cap stocks on the other hand are the bluest of blue chips including the likes of HUL, L&T, ICICI Bank, Reliance, ITC, Infosys, TCS and the like.

Mid caps and small caps tend to be more volatile. This means if the Sensex falls by 2 per cent, these stocks would fall to a larger extent.

So, if you are a risk averse investor and would prefer some degree of safety, the best thing would be to invest in large caps.

Another reason to recommend large caps at this stage is that some of them have hit 52-week lows. These include the likes of Axis Bank, ICICI Bank, ONGC, NMDC etc. So, you are getting the stock much cheaper. In fact, mid caps and small caps have run up too fast this year.

Also, liquidity is much better in the case of large cap stocks as compared to small cap or mid cap stocks.

The interesting thing to note this year is that interest of mutual fund managers has gradually shifted to the mid and small cap stocks. However, with most of the large cap stocks including those in the pharma, engineering and banking space taking a beating, one would not be surprised, if there are gains in large cap next year.

GoodReturns.in