Whether you are a retail investor, an avid saver looking at diversifying your basket of eggs, or new to investment altogether, terms like small-cap and mid-cap are bound to catch your attention.
In this article, we dive deeper into understanding what these terms mean and whether you should opt to invest in large-cap or small-cap stocks.
In India, the Securities and Exchange Board of India (SEBI), the financial markets regulator, has classified large-cap, mid-cap and small-cap companies as follows:
a. Large Cap: 1st – 100th company listed on the stock exchange in terms of full market capitalization*
b. Mid Cap: 101st – 250th company listed on the stock exchange in terms of full market capitalization*
c. Small Cap: 251st company onwards listed on the stock exchange in terms of full market capitalization*
*Market capitalization is a component that helps you determine how large a company is.
When it comes to investing in financial markets, research comes first. Then comes the acknowledgement of your risk tolerance and understanding of your financial goals.
For instance, while small-cap stocks are more volatile, large-cap stocks are stable and mature. Small-cap stocks seek aggressive growth when compared to large-cap companies. While small-cap stocks pose a greater risk, large-cap stocks are not risk-averse.
Note: Small-cap investors generally invest in these stocks strictly after undertaking extensive research on the company in question.
Also Read: Public Provident Fund to Fixed Deposit: Top 6 Investments on Dhanteras 2023 to Bring Home Prosperity
Specifically, since April 2023, the Nifty Small-Cap index has been on a consistent upward trend. In fact, both Nifty Small-Cap and Nifty Mid-Cap indexes reached their record
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