How small cap, mid cap and large cap stocks are affecting the market in 2020?

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Hello everyone,  Normally, the returns generated by large-cap stocks are low compared to mid-cap stocks and small-cap stocks in the long run. This is one of the reasons most retail investors don't invest in large-cap stocks.  But some large-cap stocks are an exception at certain times.  

In this post, we'll explore 5 fantastic large-cap stocks to buy now which have delivered impressive returns. They have the potential to yield massive returns in the near future. It's very important for investors to understand the benefits of investing in large-cap stocks.  It's an immense help for investors if they know the idea behind their investment strategy.  

We'll go through the tremendous benefits the large-cap stocks offer to the investors before getting into the details of our extraordinary stocks.  Companies with the market capitalization above Rs. 20,000 crores are considered as large-cap stocks.  Companies with a market cap less than Rs. 20,000 crore and more than Rs. 5,000 crore are considered as midcap stocks.  And the companies with the market cap below Rs. 5,000 crore are considered as small-cap stocks.  

How small cap, mid cap and large cap stocks are affecting the market in 2020?


HOW LARGE-CAP STOCKS ARE MORE STABLE THAN SMALL-CAP AND MID-CAP STOCKS?


Large-cap stocks are more liquid than other stock types.  Highly liquid stocks trade frequently with more buyers and sellers at all times.  This enables us to always buy or sell near the current market price.  Because of their huge market cap, they are more stable than mid-cap and small-cap stocks. 

In other words, they are less volatile compared to other stocks.  This means the stock prices move up and come down gradually compared to other stock types.  This feature makes them less risky than other stock types.  

Please give your attention to an example here.  Suppose an investor invests in 1 large-cap stock and 1 small-cap stock and earns 20%  on each stock.  As mentioned earlier small-cap stocks are riskier than large-cap stocks.  Here his chances of losing money in small-cap stock were more compared to large-cap stock.  This means he has taken less risk in large-cap stock compared to small-cap stock to earn the same returns.  

Now let's understand more about the large-cap stocks that we are going to discuss in this post.  All the shortlisted stocks are part of the Nifty50 index.  These stocks have healthy profit & loss reports, balance sheets, and other financial statements compared to other stocks.  

SOME SHORTLISTED STOCKS WITH GOOD RETURNS:


All the companies have been giving impressive dividend payouts for many years.  Our focus is to earn profits by capital growth or the gain in the stock price.  The dividend is an added bonus for us.  At the end of the post, we'll see an effective exit strategy.  

Now, let's dive into the details of our shortlisted stocks.  Let's take up examples of some stocks:

1. Hindustan Unilever: This stock has delivered a good 14% returns in the past 1 year even in these troubled times of situation.  The stock has a very beautiful chart with the prices moving up gradually for the past  3 years.  It has given 91% returns in the past 3 years.  

Please note that all financial data in this post are on 25th May 2020.  The stock is in the FMCG - Household Products sector with a market cap of Rs. 4,67,051 crore.  The recent price was Rs. 1,988.  The stock name is Hindustan Unilever.  

Nobody needs an introduction to this company. Their brands are Annapurna Salt & Atta, 3 Roses, Taj Mahal, Red Label, Active Wheel,  Rin, Surf Excel, Close Up, Fair & Lovely, Pears, Pepsodent, Vaseline, and many more.   

2.  Asian PaintsThis stock has delivered 17% returns in the past 1 year.  It has given 42% returns in the past 3 years.  It's in the Paints sector with a market cap of Rs. 1,55,189 crore.  The recent price was Rs. 1,618.  The stock name is Asian Paints.  The NSE stock symbol is ASIANPAINT.  Asian Paints is a very familiar name in India.  It's India's largest paints corporation.  It's engaged in the business of manufacturing, selling and distribution of paints, coatings,  home decor products, bath fittings, etc.  

3.  Dr Reddy's LaboratoriesThis stock has given an impressive 46% returns in the past 1 year.  And it has delivered 61% returns in the past 3 years.  It's in the Pharmaceuticals sector with a market cap of Rs. 64,688 crore.  The recent price was Rs. 3,893.  The stock is Dr Reddy's Laboratories.  

4.  Nestle IndiaThis stock has delivered 52% returns in the past 1 year.  It has given mind-blowing 144% returns in the past 3 years.  It's in the FMCG - Foods sector with a market cap of Rs. 1,56,340 crore.  The recent price was Rs. 16,215.  The stock name is Nestle India. Again there's no need to introduce this company.  

5. Airtel:  It provides mobile services, fixed-line broadband and voice services.  All the stocks have sustained the effect of the problem till now and are heading towards the north.  Based on the information detailed until now these 5 stocks have the potential to beat the market returns and deliver big returns in the near future.  Said that we don't know the future events now.  

The stock market offers us the opportunity to generate great returns but there's a chance of losing our capital as well.  That's the risk we have to manage for our rewards.  We have to plan our exits properly. 

CONCLUSION: 


Our 5 shortlisted stocks may do very well for long periods of time but it's a good idea to review them periodically.  Some investors review every 3 months, 6 months, or 1 year.  It's the predefined time to decide whether to continue investing in the same stock or invest in a better opportunity.  

So, this was a brief description of the types of stocks and also it's condition in the market.




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