MID-CAP SHARES

There is no classical definition of mid-cap shares. The name ‘mid-cap’ originates from the term, medium capitalised. It is based on the market capitalisation of the stock. Market capitalisation is calculated by multiplying the current stock price with the number of shares outstanding or issued by the company. The definition of mid-cap shares can vary across markets and countries. In case of India, the National Stock Exchange defines the mid-cap universe as stocks whose average six months market capitalisation is between Rs. 75 crore and Rs. 750 crore. In the US, mid-cap shares are those stocks that have a market capitalisation of Rs. 9,000 crore to Rs. 45,000 crore. In India, these shares will be classified as large cap shares. Thus, classification of shares into large-caps, mid-cap and small-cap is made on the basis of the relative size of market in a country. The total market capitalisation of US markets is $15 trillion. In India, the market capitalisation of listed companies is around $600 billion.

The theory is that large-cap shares have lesser growth potential since the turnover and profits of large companies are already high in the context of that particular market. On the other hand, mid-cap shares are considered an attractive avenue for investing because their growth rate should be faster. It is analogous to investing in an emerging market, like India, as compared to a

mature market. However, on the flip side, mid-cap shares are of small companies where revenue and profits could be more volatile than large companies. At the same time, the availability of shares for trading in the secondary market is also limited in comparison to large-cap shares.

The National Stock Exchange manages an index called CNX Midcap 200. The objective of such an index is to capture the movement in the mid-cap shares segment.