Bluechip or Midcap or Smallcap – What are you buying?

Published on: December 14, 2023

In the raging bull market, everyone is eager to make money. The pigs are always on their toes to gain while the sheep will use all their contacts to get the stock tips.

But which stocks should you buy? Bluechips, midcaps, or smallcaps?

The recent market dynamics have seen an extraordinary surge, with every dip being aggressively bought by both Domestic Institutional Investors (DIIs) and retail investors.

The paradox lies in the fact that blue-chip stocks have not performed as anticipated despite the Nifty reaching all-time highs.

Let’s get into the ratio analysis of Nifty50, Midcap100, and SmallCap100 and compare them with the broader market index, Nifty500.

Source: Zone Web, Definedge

Nifty50 vs. Nifty500

If you want to make it big, forget the bluechips or Nifty50 stocks. The Nifty50/Nifty500 ratio chart shows that bluechips have underperformed the broader market.

Nifty Midcap100 vs. Nifty500

The Nifty Midcap100/Nifty500 ratio chart is trending at an all-time high. This means that midcap stocks are outperforming the broader market. Midcap stocks current trend is like Virat Kohli hitting a cover drive – they are offering a lot of opportunities for growth.

Nifty SmallCap100 vs. Nifty500

The Nifty SmallCap100/Nifty500 ratio chart has just broken out from its technical resistance. This means that smallcap stocks are poised for a rally. However, smallcap stocks are also more volatile than midcap and bluechip stocks.

So, what should you buy?

It depends on your risk tolerance. If you are risk-averse, you should stick to bluechip stocks. If willing to take on more risk, you could consider midcap or smallcap stocks.