Investment in stock markets is known for its inherent volatility. However, they are also known to grow in the long term. Therefore, investors with a long-term investment perspective can take a plunge in the stock market by investing in quality stocks and hold them for the long term. Compared to large-cap stocks, mid-cap stocks are known to provide better returns even if they are a bit riskier. Check out these top mid cap stocks to buy for long term and include in your portfolio for better diversification.
Read More: Large and Mid Cap Funds – All you need to know
What are mid-cap stocks?
Mid-cap companies are stocks of companies ranking between 101 and 250 on the stock exchanges. These companies are often in a phase of growth and expansion, with the potential for higher returns compared to large-cap stocks. They are generally considered to have a moderate level of risk, as they have established themselves to some extent but still have room for further growth. The returns from these companies are more than that of large-cap stocks and also have an element of stability as compared to small-cap stocks.
Top mid-cap stocks to watch out for in 2023
Here’s a look at some of the top mid-cap stocks to consider investing in 2023:
The Indian Hotels Company Ltd.
This company was formed in 1868 and is one of the biggest names in the hospitality industry. The Indian Hotels Company Limited owns and manages many hotels, palaces, and resorts not only in India but also abroad. The company operates under many brands like Taj, Vivanta, TAJ SATS, QMIN, and others. Besides operating and managing hotels, the company is also in the business of air catering, owning bars, clubs, restaurants, cologne, spas, boutiques, and more.
The key details of this company are tabled below. Figures as of Jun 22, 2023
| Category | Details |
| Market Capitalization | Rs. 56,084 crores |
| PE Ratio | 45.96 |
| Return on Equity | 12.91% |
| Debt Equity Ratio | 0.10% |
| Promotor’s Holdings | 38.19% |
| Share price | Rs. 396.15 |
| Dividend Yield | 0.31% |
The trailing returns of The Indian Hotels Company are tabled below
| Period | Trailing Returns |
| 1 year | 85.38% |
| 3 years | 71.81% |
| 5 years | 24.83% |
| 10 years | 24.61% |
Federal Bank Limited
This is a very well-known bank and provides a range of financial services to the customers. The bank operates in four major segments namely the retail banking business, treasury, wholesale and corporate banking, and other banking operations. The Federal Bank Limited was previously known as the Travancore Federal Bank and was incorporated in 1931.
The key details of this company are tabled below. Figures as of Jun 22, 2023
| Category | Details |
| Market Capitalization | Rs. 26,038 crores |
| PE Ratio | 8.27 |
| Return on Equity | 14.98% |
| Debt Equity Ratio | – |
| Promotor’s Holdings | – |
| Share price | Rs. 123.10 |
| Dividend Yield | 0.81% |
The trailing returns of The Federal Bank Limited are tabled below
| Period | Trailing Returns |
| 1 year | 41.01% |
| 3 years | 36.69% |
| 5 years | 7.94% |
| 10 years | 10.97% |
TVS Motor Company Ltd.
This company is one of the biggest names in the two-wheeler segment and is also present in the three-wheeler segment. TVS has a significant presence not only in the country but also in many other countries in Africa, Southeast Asia, the Middle East, and Latin and Central America.
The key details of this company are tabled below. Figures as of Jun 22, 2023
| Category | Details |
| Market Capitalization | Rs. 63,579 crores |
| PE Ratio | 48.28 |
| Return on Equity | 25.54% |
| Debt Equity Ratio | 1.65% (TTM) |
| Promotor’s Holdings | 50.27% |
| Share price | Rs. 1337.95 |
| Dividend Yield | 0.37% |
The trailing returns of TVS Motors are tabled below
| Period | Trailing Returns |
| 1 year | 80.77% |
| 3 years | 54.36% |
| 5 years | 17.52% |
| 10 years | 44.33% |
Cummins India Ltd.
Cummins India Ltd is a subsidiary of the Cummins Inc. Group, based in the USA. The company is involved in the design, manufacturing, distribution, and servicing of a wide range of engines, including diesel and alternative fuel engines spanning from 2.8 to 95 litres in capacity. Additionally, Cummins India specialises in producing diesel and alternative-fueled power generator sets with a capacity of up to 3000 kW (3750 kVA). The company also offers a comprehensive range of related components and advanced technology solutions.
The key details of this company are tabled below. Figures as of Jun 22, 2023
| Category | Details |
| Market Capitalization | Rs. 51,806 crores |
| PE Ratio | 41.60 |
| Return on Equity | 18.42% |
| Debt Equity Ratio | 0.00% (TTM) |
| Promotor’s Holdings | 51.00% |
| Share price | Rs. 1,876.15 |
| Dividend Yield | 1.36% |
The trailing returns of Cummins India Limited are tabled below
| Period | Trailing Returns |
| 1 year | 92.47% |
| 3 years | 71.85% |
| 5 years | 22.83% |
| 10 years | 15.02% |
Persistent Systems Ltd.
Persistent Systems is a company that offers software engineering and strategy services, assisting businesses in implementing and modernising their operations. They provide their own software and frameworks, which include pre-built integration and acceleration capabilities. Additionally, Persistent Systems has established partnerships with prominent providers like Salesforce and AWS, enhancing their ability to deliver comprehensive solutions to clients.
The key details of this company are tabled below. Figures as of Jun 22, 2023
| Category | Details |
| Market Capitalization | Rs. 37,939 crores |
| PE Ratio | 41.47 |
| Return on Equity | 24.60% |
| Debt Equity Ratio | 0.05% (TTM) |
| Promotor’s Holdings | 31.26% |
| Share price | Rs. 4,943.10 |
| Dividend Yield | 1.01% |
The trailing returns of Persistent Systems Limited are tabled below.
| Period | Trailing Returns |
| 1 year | 55.09% |
| 3 years | 103.71% |
| 5 years | 43.50% |
| 10 years | 34.50% |
What are the reasons to invest in mid-cap stocks?
Investing in mid-cap stocks can be attractive for several reasons.
- Mid-cap companies are often in a growth phase, which means they have the potential for higher growth rates compared to big, established companies.
- Also, since mid-cap stocks are less analysed by experts, there can be market inefficiencies, creating opportunities for individual investors to find undervalued stocks and potentially benefit from price fluctuations.
- Including mid-cap stocks in an investment portfolio can provide diversification benefits by spreading risk across different market segments.
- Lastly, mid-cap companies are usually more agile and innovative, allowing them to quickly adapt to market changes and seize emerging opportunities.
However, it’s important to note that investing in mid-cap stocks also carries certain risks. These stocks can be more volatile, have lower liquidity, and may face challenges in unfavourable market conditions. Therefore, it is important to invest in mid-cap stocks after a thorough research and understanding of the price and volume movements of the stocks and the market in general.
Who should invest in mid-cap stocks?
Mid-cap stocks are ideal for investors with a moderate risk appetite and a medium to long-term investment horizon. This allows the investments sufficient time to grow and meet the target financial goals. Mid-cap stocks are also a good investment option for investors looking to invest in growth stocks.
Many actively managed mutual funds and hedge funds also invest in mid-cap stocks as part of their investment strategies. These fund managers aim to outperform the market by carefully selecting mid-cap stocks that they believe are undervalued or have significant growth prospects.
Conclusion
Mid-cap stocks offer a unique investment opportunity for individuals and institutional investors alike. Positioned between large-cap and small-cap stocks in terms of market capitalization, mid-cap stocks can provide a balance between growth potential and risk. These stocks can offer the potential for capital appreciation over the long term, making them appealing to growth-oriented investors and those with a longer investment horizon.
FAQs
Small cap stocks are stocks that are ranked after 250 on the stock exchanges in terms of market capitalisation. These stocks are considered to be quite risky as compared to mid-cap stocks but have the potential to give the highest returns in the long term.
Mid-cap stocks are generally growth stocks with a huge potential to become market leaders. These stocks are less volatile as compared to small-cap stocks and offer better returns than large-cap stocks.
Nifty Midcap 50 is the index on NSE that includes the top 50 companies in the mid-cap segment based on their full market capitalization and aims to track the movement in this segment.
Yes. Investors looking for a cost-effective and less risky or balanced way to invest in mid-cap stocks can invest in mid-cap funds through SIPs. These funds concentrate on mid-cap stocks and other securities as per the fund objective and have a diversified portfolio spreading the risk of investing in mid-cap stocks.
