Even as the recent correction in the Indian market has pulled the benchmark indices away from near record highs and back towards early-2013 levels, price action in the mid-cap space has pushed a number of these stocks towards 52-week highs. Data show that the banking, financial services and insurance (BFSI) sectors has seen the maximum number of stocks touching new 52-week highs.
According to data available on Capitaline, 228 stocks that are part of the BSE-500 index have touched their respective 52-week peaks in the current calendar year. Further, 114 of the BSE mid-cap index that comprises a total of 247 stocks have touched year-highs in the recent days.
The surge in the stock prices in mid caps comes at a time when FIIs have been bullish on the Indian market. The calendar year has seen FIIs putting in more than $15 billion in Indian shares in less than six months.
While experts attribute the surge in stock prices largely to foreign flows, they add that the BFSI sector has seen the maximum flows on account of expectations of rate cut and growth in profits and returns. May saw mid-cap banks like Uco Bank, Allahabad Bank, Corporation Bank and Standard Chartered IDR hit 52-week highs.
?Expectation of a further cut in interest rates is driving investor interest in banks and financial institutions. In the last two quarters, banks have reported profits in the treasury segment due to interest rate cuts. We are overweight on this sector,? said Anand Bagaria, senior research analyst, Finquest Securities. Market observers expect treasury gains to continue in the coming quarters as well.
The performance of the BFSI space is followed by the pharmaceutical names in BSE 500 index, while realty and textile stocks have also done well. While investors sometimes prefer large caps as they are considered safer and less volatile, experts say it may not always be best to make investment decisions based on market capitalisation. Instead, they should look at the management credentials and balance sheet performance of individual companies.
The small-cap space has also seen notable rises, with 191 stocks touching fresh highs. ?Frontline stocks are the first to gain during a rally. Demand for quality mid- and small-cap stocks grows after valuations of bluechips start to look stretched. For instance, Berger Paints hit a 52-week-high after Asian Paints touched its 52-week-high of 5,047 in March,? says Daljeet Kohli, head research, IndiaNivesh Securities.