While large cap index on Sensex is hovering near its 32-month high, BSE Midcap is down 15% during the same period. A lot of companies in the mid-cap space have seen their share price go up multiple times.
An FE study shows that out of 272 BSE Midcap companies, more than half of them are below January 2008 levels. While BSE Midcap components have changed during this period, we have considered only the current index constituents. Essentially, companies with good earnings track record, domestic focus and essentially plays on the domestic consumption theme have been the major gainers. Stocks in the pharma, FMCG, healthcare, NBFCs and auto ancillary have gained multiple times since the January 2008 levels when Sensex touched 20k levels.
?Growth and quality has been the investment theme. People have invested in companies with good quality balance sheets and strong earnings growth,? said Vikas Khemani, head institutional equities, Edelweiss.
Amongst the biggest gainers in the mid-cap space are gold loan provider Manappuram General Finance, whose business has flourished with rise in gold prices. Its share price has skyrocketed seven times since January 2008. The company has posted good growth in its asset under management and overall business.
During the period, stock prices of Whirlpool zoomed six times. The company has zero debt and posted strong cash flows. Also, it?s ROE and ROCE has been over 40% in the past few years. Zydus Wellness’ share price was up five times. The stock has seen a sharp re-rating on the back of strong earnings growth. Other stocks in this space like Torrent Pharma, Emami, P&G Hygiene GSK Consumer have all gained atleast two to three times. Meanwhile, companies with high leverage and poor earnings growth have borne the brunt as it clearly reflects from their share price performance.
Stocks operating in sectors like media, real estate and brokerages were way below its January 2008 levels. Companies that have high debt and low cash flows have been underperformers,? said Sandip Sabharwal, CEO, portfolio management services, Prabhudas Lilladher
Indiabulls Financials, which trading above Rs 900 in January 2008, is still down about 83%. Aban Offshore is also down over 80%. The stock has been punished because of its debt overhang and losses due to sinking of its rig.