If you think mid-caps are beaten down and better growth picks in this market than their larger peers, think again. When the going gets tough, the bigger tougher boys get going.

Share Market Live

NSE

A quick study of the results of large-cap and mid-cap companies for the quarter ended June 30 revealed an interesting picture. The sample under the study included the non-financial sector large-cap companies in the Nifty 100 that have declared their results so far (a total of 50 companies) and mid-cap companies in the Nifty Mid-Cap 100 (40 have declared results so far).

The analysis showed that the revenues of the large-cap companies grew at over 23 percent while those of the mid-cap companies managed only 15 percent. At an operating profit level too, large-caps recorded an EBIDTA (earnings before interest, depreciation, tax and amortization) growth of 22 percent compared to a meager 12 percent for the mid-cap companies.

So, clearly the larger companies have fared better on the operational growth and profitability fronts.

On the other hand, the mid-cap companies scored well on cost control front—especially finance costs. While finance costs for large-caps increased 36 percent year-on-year (rising faster than operations growth), mid-cap companies saw this cost increase only 8 percent, which was slower than their business growth rates.

Profits after tax for the mid-cap companies depicted stronger growth than the large-caps, primarily due to some companies getting back into the black after incurring losses in the corresponding period last year.

In a nutshell, large-caps are outperforming mid-cap companies as far as core growth is concerned and that suggests investors will likely remain focused on these stocks for some more time, till the growth trend broadens and starts getting reflected in the performance of the mid-sized companies.

Till then it is a market of the biggies!

First Published:Aug 7, 2018 11:47 AM IST