Mid cap stocks are increasingly being perceived as attractive investment options with high growth potential, especially in the current market scenario. However, investors must recognize that the risk of investing in mid cap companies is considerable as even a slight turbulence in the economy can send these companies on a downward spiral.

The economic crisis which evolved out of the Western Economies has perhaps more devastating impact than the Great Depression of 1929-30. The main root of this crisis, i.e., the subprime crisis, which got multiplied and went unchecked, had a cascading impact on financial institutions across the globe. The crisis started with the fall of big stalwart `Lehman Brothers' and the ripples created by it finally engulfed other major financial institutions such as Wachovia Bank, Washington Mutual, etc.

Though central banks all over the world, in consultation with their respective governments, have acted swiftly and announced major financial and economic packages to revive the economy, it has been estimated by Oxford Economics that the current crisis has eroded approximately $28 tn of global financial wealth.

In all these devastating developments, the maximum brunt was borne by the retail investors. India, too, did not remain insulated and there was a colossal loss of wealth across the economy. From the beginning of 2005, the bull rally in the stock markets attracted many investors who wanted a share of the profits. Within a span of just three years, everything has changed. Many investors have burnt their fingers and are, now, wary about investing in the stock markets.

Generally, it is perceived that capital markets play a prominent role in the growth of any economy by transferring resources from deficit units to surplus units. All the category of stocks, such as large, mid and small cap stocks, add to the momentum. Mid cap stocks play an important role as they offer good returns in both bull and bear run and provide a cushion to investors' portfolio. In the current financial cataclysm, mid caps have been hit severely. Despite this, the fact that these stocks have exhibited a CAGR of 30-40% over the last five years, makes them a good investment bet. However, investors must consider certain aspects before investing in these mid cap stocks. First, a mid cap stock of low PE ratio should be considered. Second, promoters' holding in the company should be sizeable (at least 25-30%). While the financial institutions, HNIs and fund houses are aware about these check points, it is usually the retail investors who ultimately become the victims of a meltdown.

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