Shift from mid caps to large caps

Markets are in a state of limbo for the past one month. Though it is possible for markets to stay range bound for a long period of time and there are many such examples worldwide yet in India that is a very rare possibility. Usually our markets have never remained confined to a narrow range of around 500 points of BSE Sensitivity Index for more than a couple of months. This means that going by the past data a decisive move must happen in February. Now this move can be either a swift up move which can trap all short sellers or it can be a significant correction which has not happened for a while. Either way it makes sense to book out of your mid caps and buy into frontline stocks which have either corrected over the past couple of weeks or have been meandering in a lackluster way. If the market corrects due to heavy selling by FIIs over the past couple of days mid caps will fall far more severely than large caps. On the other hand if the market on the back of encouraging Corporate results and expectations of good disinvestment of public sector entities and favourable policy announcements in the forthcoming budgets moves up then large cap stocks are bound to start participating again and will at least at least in the short run outperform the mid caps. It is only if the indices continue to remain range bound then mid caps might continue their outperformance. However possibility of such a scenario is remote going by the past trends. Also majority of the quality mid caps have already run up significantly and do look expensive.  Hence from whichever way you look at the markets going ahead it makes sense for any discerning investor to book out of mid caps and move into large frontline stocks. Even if you wish to hold on to some mid caps do keep a strict stop loss on your holdings