Midcap stocks normally offer huge opportunities for growth. In a bear market they are prone to more downside too. But risk is always proportionate to return.
Of late, I have seen a lot of advises to ride mainly on large cap stocks to avoid great losses. Large caps are definitely safe bets. But for those who want to take that extra bit of risk, midcaps offer a great opportunity. Not all midcaps grow to become large caps .So it's better to invest through a midcap fund for diversification and use the research of fund houses. It's also a good idea to invest directly in mid cap stocks based on the portfolio of some good mid caps fund with a great track record.
BSE midcap is currently trading at a P/E of around 8 when compared to BSE Sensex P/E of around 11 .( Check BSEINIDA site for online data). BSE midcap index has fallen to almost 2600 levels from peak level of 10000. i.e almost 75% fall from the peak. This shows that there is a limited downside while there is huge potential upside in the long run.
Reliance growth, Sundaram Select Mid cap, Birla Mid cap, Kotak opportunities are some good midcap funds where an investor may start investing systematically to reap the benefit in a 5-7 year horizon. Alternatively one can also start accumulating ETFs like Juniorbees directly through DMAT account with a long term investment perspective.
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