MidCap Companies create more wealth for shareholders

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The BSE Midcap index which has increased by 10.5 per cent reached its all time high value of this year on 6th August. The Sensex gained an increase of 2.1% during this period. The hike in Midcap index implies that midcap companies have created more wealth when compared to large caps companies this year. The term ‘cap’ refers to the market capitalization of the stock of a company. It is calculated by multiplying the stock price with the company’s outstanding number of equity shares.

Based on its market capitalization rate the companies are classified as Large cap Companies, Midcap Companies and Small cap Companies. Largecap Companies are large and well-established companies whose market capitalization for stocks is more than Rs 200 billion. These companies have a strong market presence and are considered safe for investments as the information regarding these companies are readily available. Their stocks are publicly traded and have large market capitalizations.

Mid cap companies are those companies whose stocks have a market capitalization rate within the range of Rs 50 billion and Rs 200 billion. These are mid-sized companies when analyzed on the basis parameters like size, revenues, employee and client base. Even though it is relatively more risky to invest within a midcap company but it often gives the more returns than companies with large market capitalization. Smallcap companies are characterized as the company with a market capitalization less than Rs. 50 billion and generally include brokerage.

The midcap companies who are the top wealth creators of India include Britannia Industries  (BSE 1.89 %), Eicher Motors,   IndusInd. Bank (BSE -0.76 %), Hindustan Petroleum Corporation Limited (HPCL)   (BSE 6.95 %) and Godrej  Consumer. Over this period each of these midcap companies have added their shareholders wealth by Rs 10,000 crore and Rs 15,000 crore and

The stock prices of these leading wealth creators have increased tremendously by  100-160 per cent. The main sources of investments in these midcap companies comes from many domestic institutional, high net worth and retail investors. Mutual funds have also invested about Rs 38,000 crore in the form of equities in these companies.

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