Synopsis
Fifteen years back, a company from a large industrial house raised money by floating corporate bonds at X% interest. A mid-size company raised money at X% plus 200 basis points. It was thus paying 2% more for the capital, putting it at a disadvantage. Today, that large company is raising money at X% – but so is the mid-sized company. The reason: Capital is now more easily available, and the company has also improved its balance sheet. For all mid-caps it is the cost of capital that is key. Now, whether the Nifty moves up or down, the trajectory of interest rates is surely headed south this month.
There are phases when mid-cap stocks come under pressure and are the worst performers. Despite that, in the last 10 years, they have provided the best returns. Mid-cap indices have been the top performers in the past decade. If you do not own mid-caps, your returns even in the longest of bull runs would not be very high. One of the reasons why mid-caps are able to do well when an economy like India grows at a faster pace is that these companies
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