Best Midcap stocks to buy now in India 2024

In this article, we will discuss

Midcap Stocks in India - Overview

Midcap is a term that encloses companies and stocks which fall in between large-cap and small-cap categories. Midcaps fall in the range of Rs 5,000-20,000 crore. This classification is variable and can change with the change in a company’s market valuation. The term market capitalisation is reckoned with the help of a company’s outstanding number of shares and the value of each share. However, the classification is also subject to a company’s rank in the benchmark indices such as Sensex and Nifty. For instance, the companies which are listed from 101st – 250th in the Nifty Index are generally considered mid-cap companies. Nifty also has a benchmark mid-cap index in India called the Nifty Midcap 50 which hosts the top 50 most traded mid-cap securities in the market.  Given their advantageous position in the stock market, where they can exploit the best of both ends, i.e. risk moderation and substantial returns, they have become a favourite for seasoned investors. They also aid in diversifying an investor’s portfolio. A company’s graduation from small-cap, in most cases, attests to its growing profitability and productivity until it reaches the large-cap tier. In the process, there is an increase in both components of returns - dividends and value appreciation.

List of Best Midcap Stocks to buy now in India

Sr. NoCompany NameBSE Scrip CodeCMP as on May 30, 2023RatingIndustry
1Aarti Industries Ltd.524208512.451Specialty Chemicals
2Amara Raja Batteries Ltd.5000086083Auto Parts & Equipment
3CCL Products (India) Ltd.519600620.151Tea & Coffee
4Coforge Ltd.5325414,4043IT Consulting & Software
5Computer Age Management Services Ltd.5432322,1465Other Financial Services
6CRISIL Ltd. 5000923,7045Other Financial Services
7Crompton Greaves Consumer Electricals Ltd.539876274.73Household Appliances
8Cyient Ltd.5321751280.953IT Consulting & Software
9Deepak Nitrite Ltd. 5064012072.63Commodity Chemicals
10Gujarat Gas Ltd.539336503.353Integrated Oil & Gas
11ICICI Securities Ltd.5411795050.5Other Financial Services
12JB Chemicals & Pharma Ltd. 5069432,1170.5Pharmaceuticals
13Narayana Hrudayalaya Ltd.5395518640.5Healthcare Facilities
14Polycab India Ltd.5426523484.13Other Elect.Equip./ Prod.
15Relaxo Footwears Ltd.530517897.252Footwear
16Sundram Fasteners Ltd.5004031098.91Auto Parts & Equipment
17Symphony Ltd.517385850.33Consumer Electronics
18Vinati Organics Ltd.5242001,8194Commodity Chemicals
19Voltas Ltd.5005758221Consumer Electronics
20VST Industries Ltd.50996633514.5Cigarettes,Tobacco Products

Key things an investor should look at before adding midcaps to their portfolio: 

  • Financial Health: No matter what size’s stock you're interested in, it's important to invest in companies with strong balance sheets. Given the unpredictability of business, a strong balance sheet can help companies survive the lean years. Moreover, a stronger balance sheet enables midcap companies to be less riskier. When investing in mid-caps, you are in a way combining the financial strength of a large-cap with the growth potential of a small-cap with the end result often being above-average returns.
  • Growth: Revenue and earnings growth are the two most important factors in long-term returns. Mid-cap stocks have outperformed both large-cap and small-cap stocks because of their superior growth on both the top and bottom line. Industry experts suggest mid-caps are able to produce better returns because they are quicker to act than large caps and more financially stable than small caps, providing a one-two punch in the quest for growth. Investors interested in mid-cap stocks should consider the quality of revenue growth when investing. If gross and operating margins are increasing at the same time as revenues, it's a sign the company is developing greater economies of scale resulting in higher profits for shareholders. Another sign of healthy revenue growth is lower total debt and higher free cash flow. The list goes on and all other factors used to assess strong quality stocks apply here. It is also vitally important with mid-caps that you see progress on the earnings front because that's what's going to turn it into a large-cap. Revenue growth is important but operational growth is vital.
  • Management Quality: The most important factor one should be mindful of while investing in mid-cap companies is management quality. Since large-cap companies have a long history of in-depth coverage by research and brokerage houses, investors can be more confident about the quality of their management. But in the mid-cap space we have to ensure that the company’s management has the capability and bandwidth to take the company to the next level. However, as mid-cap companies are generally under researched, there is a need for stricter due diligence.
  • Competitive Advantage: This is one of the best ways to identify a good midcap stock. A company can stay in competition by offering better services and products as it grows. For example, Madras Rubber Factory (MRF Ltd as it is now known as) was started by a small town balloon toy manufacturer and the company has been improvising its products and services as per the demand of customers. This zeal to keep innovating and tweaking or diversifying their offering as per demand has given them a competitive edge over contemporaries and kept them going strong over the years. To spot whether a company possesses a competitive advantage, see how innovative they have been. You can do so by taking a look at the patents they have, how active their R&D wing is, and how frequently they launch innovative products and services. Competitive advantage can be in terms of product or price. Price advantage is also important. A price setter usually gets the first mover advantage to lead the rally while its peers follow. It is best to go with the leader of the pack rather than the laggard.
  • High-Margin Businesses: Another important criterion for a good midcap stock is to look for businesses that have high margins. Usually companies command high margins either due to a lack of competition or some moat, some operational efficiency or because they command a leading position in the industry. Moreover, these stocks should have sustained margin over time that doesn’t fluctuate every quarter or year.

Detailed profile, pros and cons of MidCap Stocks in the model portfolio

Crompton Greaves

Crompton Greaves Consumer Electricals (CGCEL), the demerged consumer business of Crompton Greaves (CG), is the undisputed market leader in the fans segment and a formidable branded player in the light consumer electrical market. The company now intends to take advantage of the premiumization trend which will be margin-accretive, going forward. It has launched innovative products in each of its existing categories such as decorative fans, star Miranda, hybrid winding pumps, etc. Exploring new adjacencies also remained in focus to reach out to an increasing number of consumers and win a bigger market share. Moreover, Butterfly acquisition will also have the ability to unlock synergies. The firm has a robust distribution network in the consumer electrical space of 3,000 plus distributors and 100,000 plus touch points. The company’s investment in rural business continues to drive growth. Crompton’s efforts to save costs, focus on premiumization, and timely price hikes helped it protect profitability in unfavorable inflationary environment. It continues to aggressively spend on marketing and advertising to enhance its brand recall and consumer awareness. The company has a good track record of ~25% ROE in the last 3 years. It also has a healthy dividend payout of ~41%. Going forward, macro developments like nuclear families, the availability of easy finance, and the government’s thrust on affordable housing are expected to push up the per-capita consumption in the country and sustain the growth momentum of this business. On the negative front, the company faces high competition from leading players such as Orient Electric, Havells, etc which could lead to a loss in market share in key products.

Coforge 

Coforge is one of the leading mid-sized Indian IT services company, and is engaged in Application Development and Maintenance, Managed Services, Cloud Computing, and Business Process Outsourcing to organizations in a number of sectors viz. Financial Services, Insurance, Travel, Transportation and Logistics, Manufacturing and Distribution and Government. The company has well diversified business portfolio with increasing offshoring revenues. FY23 – A Year of achieving a US$ 1 Billion-dollar Revenue Milestone for the company. The firm’s fresh order intake TCV has seen a robust 6-Year CAGR growth of 18.5%.  It has a high degree of visibility through contracted revenues and repeat business. FY23 also saw the highest-ever order intake of US$1.3 billion and a 12-month committed order book at US$ 869 million.  In Q4FY23, the company witnessed one of the lowest declines in attrition levels in the industry as it stood at 14.1%. Coforge has strong execution capabilities, continuous order wins, healthy client metrics along with scaling growth of top accounts, and a favorable outlook across verticals- BFS, Insurance, and Travel. On the other hand, intense competition among local players and multinational corporations poses a challenge for the company.

CCL Products LTD

CCL Products Ltd is in the business of converting raw coffee beans into instant coffee powder or granules. The company is the country's largest coffee processor and has a lot of top global private-label coffee players as their clients. The company is also India’s largest instant coffee exporter. Apart from its B2B business and the company also has its own private-label coffee by the name continental which is growing at a good pace. A strong growth in its domestic business, its new plant in Vietnam getting commissioned and growing demand from international markets will support a sustainable volume growth. The company has also been continuously making greenfield and brownfield expansions to enhance its capacity. The company follows the business model of entirely passing through the prices of green coffees to its customers. Therefore, any changes in the prices of coffee does not impact the company's EBITDA. Further the company’s increasing value-added variants and high share of small packs are expected to enhance the margins going further. The company has delivered an impressive annual turnover volume growth of around 40 to 41% in FY23 and the guidance for the next year is also close to this. As the firm is in a very dynamic business, the competition is also heating up. On a bright side, CCL Products have a decent share in the market and intends to increase it further.

Computer Age Management Services

Computer Age Management Services popularly known as CAMS commands a leadership position with the highest market share of ~76% of total Mutual Fund AUM in a duopoly RTA market with only 1 other major player, KFin Technologies (formerly known as Karvy). Over the last five years, the firm has grown its market share from ~61% during March 2015 to approximately ~68% currently, based on Average Asset Under Management (AUM) serviced. The firm is India's Largest Registrar and Transfer agent (RTA) as it serves 10 of Top 15 Asset Management Companies with nearly 3x AUM of the 5 MFs serviced by other RTAs. Its AuM stood at Rs. 28 Tn during Mar'23 quarter and has a huge potential to grow in India's underpenetrated MF Industry. The firm has a strong and consistent financial track record of compounding sales and profit growth by 13% and 21% respectively over the last 5 years. It also rewards its shareholders which is visible from a robust ROE & ROCE of around 40% and 47% respectively in the last 5 years. India's mutual fund penetration (AUM-to-GDP) is significantly lower at 15.9% as of March 2022, compared to the world average of 75%  Additionally, India has one of the lowest MF penetrations globally with an AUM-GDP ratio of 15.9% as of March'22 vs world average of 65%, this itself offers long-term growth potential for the overall MF and RTA industry. The company’s derives a significant portion of its revenue from mutual funds services business which may pose a risk.

Polycab India

Polycab India (PIL) is among the leading companies in the Indian cable and wire industry with about  market share in the organised wires and cables markets. The market share stands at 24% and is on track to keep marching upwards. The company’s founders have over four decades of experience in the industry. PIL's market position is facilitated from its strong distribution network of over 4600 authorized dealers. It has significant market share in West and South India, which contributes around ~70% to its revenue share. PIL’s market is concentrated and the company is focusing on expanding its network to reach every district in India. The company has also entered the electrical appliances segment (contributing around 10% to revenues), which it plans to grow significantly over the medium term. PIL has 25 manufacturing facilities(including 2 Joint Ventures) located at Daman in Daman and Diu, Halol in Gujarat, Nashik in Maharashtra and Roorkee in Uttarakhand. Financial risk profile is strong, driven by a large net worth of Rs 5,509 crore and healthy capital structure. PIL is a net-debt free company with a strong interest coverage ratio of 29.6x. On the growth front, PIL Revenues and Profits have grown significantly at a CAGR of 15.8% and 29% respectively over the past 5 years. The company is domestically focused with only 9.8% revenue coming from exports in FY23 which is a drawback. Sudden fluctuations in raw material prices may affect the PIL’s margins negatively. Raw material costs such as copper, aluminium, steel, PVC form a significant portion of the company’s operating expenses. Majority of the raw materials required are imported and hence Polycab is exposed to foreign exchange volatility risks as well. There are many names like Airtel and Infosys which were lesser-known companies about 25 years ago, comprising the once small and mid-cap stocks of India. These companies are now prominent large-caps that have generated very good returns over the years for investors. Indeed, it's hard to believe! Today they are among the heavyweights of the country's large-cap indices. With a fast growing economy like ours and liberalised industrial and services sectors, the chances of finding small and mid-level companies with potential to become large corporations are much better than the developed economies like the US and Europe.

MidCap Stocks for investments, Watch our video on how to analyse 

However, A few risks associated with these midcap stocks are:

  • Value Trap: Value trap is when a company consistently operates in low profits with limited cash flows and cannot break through the phase while investors hang on to them thinking they will grow one day. Mid-cap companies, especially the low ranking ones, are prone to being value traps and might go defunct if the trend continues for a longer period.
  • Inadequate resources: Mid-cap companies are likely to have less efficient managerial and organisational infrastructure than large-cap companies. Therefore, even though they reap high profits and attract value appreciation, they might not be equipped to utilise the same optimally.
  • Effect of a financial bubble: A mid-cap company’s exceptional performance can be a result of an unstable financial bubble. Most of these companies, however, do not have the financial fortitude to withstand when the bubble pops. Therefore, when scouring through the best mid-cap stocks, ensure to check their financial history pre-bubble to determine their financial fortitude accurately.

Midcap Stocks - Model Portfolio

In order to get an exposure to best midcap stocks, you need a total of Rs 21,274 for the below curated portfolio as of Dec 16, 2022.

CompanyCMP as on 30 May, 2023QuantityQty*CMPWeightage
Crompton Greaves Consumer Electricals Ltd.274.7226043.416%
Coforge Ltd.4,4042880723%
Computer Age Management Services Ltd.2,14636439.3517%
Polycab India Ltd.3484.1310452.327%
CCL Products (India) Ltd.620.15116821.6518%
   38564100%

Detail Table Containing Key Metrics of Mid Cap Stocks

Sr. NoCompany NameBSE Scrip CodeNSE SymbolRatingIndustryCMP as on May 30, 2023Market Capitalization (Rs crore)Net Worth (Rs crore)Price/Earnings RatioDividend Yield (%)Debt/Equity RatioReturn on Equity (%)Return on Capital Employed (%)Operating Profit Margin (%)3 Years Sales CAGR3 Years Net Profit CAGRInventory Turnover Ratio
2Amara Raja Batteries Ltd.500008AMARAJABAT3Auto Parts & Equipment608.2010,3894,552180.840.01121613925.36
3CCL Products (India) Ltd.519600CCL1Tea & Coffee620.158,2501,244261.240.5218162311103.49
4Coforge Ltd.532541COFORGE3IT Consulting & Software4,403.5026,9042675.6411.170.132833182019 
5Computer Age Management Services Ltd.543232CAMS5Other Financial Services2,146.4510,520617391.670.00516749929 
6CRISIL Ltd. 500092CRISIL5Other Financial Services3,703.6527,0721,759401.570.003444311718 
7Crompton Greaves Consumer Electricals Ltd.539876CROMPTON3Household Appliances274.7017,5712,314410.670.692824166138.70
8Cyient Ltd.532175CYIENT3IT Consulting & Software1,280.9514,1643,093202.580.11172221-1320.72
9Deepak Nitrite Ltd. 506401DEEPAKNTR3Commodity Chemicals2,072.6028,2693,338290.310.09384524368314.07
10Gujarat Gas Ltd.539336GUJGASLTD3Integrated Oil & Gas503.3534,6505,630270.400.092531132945317.13
11ICICI Securities Ltd.541179ISEC0.5Other Financial Services505.0016,3082,403153.863.2266276426419.69
12JB Chemicals & Pharma Ltd. 506943JBCHEPHARM0.5Pharmaceuticals2,117.2516,3892,071321.050.0120252414266.40
13Narayana Hrudayalaya Ltd.539551NH0.5Healthcare Facilities864.4517,6661,485450.130.3727271997969.04
14Polycab India Ltd.542652POLYCAB3Other Elect.Equip./ Prod.3,484.1052,1815,509390.590.0217221115195.83
15Relaxo Footwears Ltd.530517RELAXO2Footwear897.2522,3361,7581140.230.011420175104.84
16Sundram Fasteners Ltd.500403SUNDRMFAST1Auto Parts & Equipment1,098.9023,0912,621410.720.29192017206.56
17Symphony Ltd.517385SYMPHONY3Consumer Electronics850.305,948839.47640.820.261518197107.13
18Vinati Organics Ltd.524200VINATIORGA4Commodity Chemicals1,818.8518,6951,828580.330.0121273113710.84
19Voltas Ltd.500575VOLTAS1Consumer Electronics822.0027,1995,4522000.520.122687-365.84
20VST Industries Ltd.509966VSTIND4.5Cigarettes,Tobacco Products3,351.005,1751,073154.570.003243292125.27

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