MBSL constructs stock market Index - “MBSL Midcap Index”
Many large-cap shares generally reach the maturity stage since the
turnover and profits of large companies are already high in the context
of that particular market.
In that respect, mid-cap shares are considered an attractive
investment avenue because their growth rate will be comparably higher.
Midcap companies are generally in the growth momentum in their life
cycles.
Thus, they may or may not pay a dividend, often deciding to continue
to reinvest in growing future operations and earning ability. For
investors looking for stock price appreciation, mid cap companies
provide a fertile hunting ground.
However on the flip side, mid-cap shares are of small companies where
revenue and profits could be more volatile than larger companies.
In a pioneering move, MBSL constructed a Stock market Index: the
“MBSL Midcap Index”, which measures the aggregate price level and price
movements of medium size companies listed on the Colombo Stock Exchange
(CSE).
There was no index to measure the price movement of medium sized
companies listed on the CSE and hence the “MBSL Midcap Index” filled
this vacuum.
The index which came into operation in the Year 1999 is revised
annually and looks at the Middle Range Market Capitalization, Liquidity
and the Profitability of the firms to be included in the Midcap Index.
MBSL Midcap Index can be used as the benchmark index by individuals
and institutional investors who prefer growth but are prepared to with
stand only conservative levels of volatility in their equity
investments.
Mid-caps generally outperform because they are in the prime of growth
and have better investor focus due to lower capitalization seeing both
cash flow and earnings per share accelerate, especially compared to
large-caps.and Mid-cap companies generally have much greater growth
potential than comparable large-caps, with more seasoned management,
liquidity, and operating histories than small-caps.
Therefore including mid-caps in an overall portfolio allocation is a
proven diversifier for increasing returns while enjoying a very
favorable risk/reward ratio. |