If you are new to the stock market, you must have heard all about “blue chip” stocks to invest in. There is no doubt that these are the best quality stocks you can buy in the Indian stock markets, being stocks of large companies and profitable in the long term. Depending on your investment goals and attitude to the stock market, you can invest in some of the top midcap stocks in India in 2023 too. If you already have a few large-caps for long-term growth, midcaps can enhance your portfolio with sustainable growth.
What are Midcaps?
Midcaps or midcap stocks are simply those stocks of companies that fall between large-cap stocks and small-cap stocks. Stocks are classified by the market capitalisation of the companies they belong to. Midcap stocks are generated from medium-sized companies. They may be suitable for earning profit in the shorter term, compared to large-cap stocks, but are known for stable growth. So before you go ahead and open a Demat account and try to get your hands on the top midcap stocks in India, you should dig deeper into the arena of midcaps.
How Do You Know a Stock is a Midcap Stock?
Stocks that are midcap stocks come from medium-sized companies. These companies have a market capitalisation that is anywhere within Rs. 5,000 to Rs. 20,000 Crores. As these are stocks that are neither too large nor too small, in terms of their value, they offer a balanced potential for growth. Midcaps offer great portfolio diversification, so they are preferred by new investors and seasoned players alike. Even when investing in an upcoming IPO, a company that promises to be medium-sized in its development is favoured. Top midcap stocks to invest in India may be for investment aimed at different goals of investors and varying terms. Although long-term stocks are typically the ones that come from large capitalisation companies, you can find some good midcaps for growth in the long haul, giving you steady rewards.
Factors to Consider While Investing in Midcaps
The main reason to invest in midcaps is to have a well-balanced portfolio, but consider these factors while you start looking at the top midcap stocks in India:
- Financial Background - Given the unpredictable nature of any business, the sound financial health of any company you invest in is of paramount importance. This is true for whatever size of company stock you invest in. Midcap companies with robust balance sheets and accounts are the best. A company should be able to survive any unforeseen event and stay afloat. When you choose a midcap stock to invest in, you are, in essence, blending a large cap’s financial resilience with the potential for growth of a small cap. What result is obvious in the end? You get returns that are above-average. Besides this, historical data suggests that midcaps, slowly graduating from small to large caps, outperform small-cap stocks and large-cap stocks. They have the best of both worlds with top line growth and bottom line growth.
- Industry Experts - Top midcap stocks in India are often recommended by market experts to expand your portfolio and nearly ensure good gains in the future. Seasoned analysts often say that midcaps get better gains as they are faster to act compared to large-cap stocks. They are also more financially sound than small caps. Those individuals who are interested in the variety of midcaps on offer should look at the quality of growth of revenue. In case operating and gross margins are rising simultaneously with revenue, this could be a sign of a company forging towards a greater economy of scale. This will lead to shareholders getting more profits.
- Company Financials - Although the financial background has been discussed, another detail needs to be explained. A midcap with a high cash flow and low debt means solid revenue growth.
- Innovative Businesses - Some of the greatest companies that have grown from small-cap companies to medium cap companies have shown innovation in ideas that has led to growth. It is worth looking at such midcap stocks (when you do your research) and choose companies that innovate constantly.
A Model Portfolio - Top Midcap Stocks to Invest
Here are five companies that have shown promise in the past and potentially have room to excel in 2023. Here are the midcap stock picks you should investigate:
- Crompton Greaves - A leader in the segment of fans in India, this is a formidable brand to contend with in the stock markets too. Entering the electrical and lighting sectors, this company is only growing with new management that has the foresight to take it to new heights. Product diversification and innovation is at the core of its growth trend.
- Polycab India - The wire and cable industry has only grown in India. Polycab is a market leader with over four decades of industry experience. The solid backbone of this company is its wide distribution network in the Indian market.
- Relaxo Footwear - Synthetic footwear is taking India by storm, and in the segment of foot apparel, Relaxo has a strong footprint. Over a 30-year span, the company has been successful in expanding its products, plants for manufacture and its customer base.
- Coforge - Any company in the IT sector is bound to start growing positively in India. Coforge is a mid-size company and one of the top midcap stocks in India. Clued on to the IT market, it is a key operator in the IT services segment offering app development and services to do with the maintenance of applications. It is also engaged in cloud computing and outsourcing of business processing to a range of companies in the travel, insurance and finance sectors.
- Deepak Nitrite - Close on the heels of China, the speciality chemical manufacturing industry is developing at a fast pace in India. Deepak Nitrite has existed since the 1970s, diversifying business operations in basic and special chemicals and performance products. It is a prime producer in the niche chemical sector with products like oximes, cumidines and colour intermediaries, supplying to industries in the Pharma, agrochemical, rubber, paper, colourant, etc., sectors and more.
Opportunities with Midcaps
If you want to open a Demat account and start investing in the stock markets, you will do well to choose a variety of stocks with midcaps in your bag among the large caps. Of course, you may invest in any upcoming IPO too, which may soon become a good midcap investment for you.
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