While 90% of Nifty small-cap and 77% of Nifty mid-cap stocks have been trading in the red since the beginning of the year, some stocks from export-driven and consumer sector have given returns up to 89.26% in the small and mid cap space.
While 90% of Nifty small-cap and 77% of Nifty mid-cap stocks have been trading in the red since the beginning of the year, some stocks from export-driven and consumer sector have given returns up to 89.26% in the small and mid cap space. However, this calender year, Nifty Midcap 100 and Nifty Small Cap 100 index has yielded a negative returns of 20.6% and 33.2% respectively.
In Nifty Midcap 100 index, the top performer was Indiabulls Ventures which gave a return of 74.18%. And HEG from Nifty Small Cap 100 index has given 89.26% in returns (YTD). “HEG has seen a significant rise in profitability over the last 12 months as graphite electrode (GE) prices have risen five-fold. Chinese limits on steel production and efforts to cut pollution are lifting steel output by Electric Arc Furnaces (EAF),” said Bank of America Merrill Lynch (BofAML) report.
While top performers in technology sector in the Nifty midcap index include Mindtree, Mphasis, Hexaware Technologies and Sterlite Technologies. In the Nifty small cap, tech companies include NIIT Technologies and Cyient. “Expectedly most of them are from technology and consumption names. There were two triggers in tech names. After years of prolonged slow growth, the sector had become undermined by funds. As earnings re-surfaced, there has been a recognition of a re-rating in the stocks,” said Harendra Kumar, managing director – Institutional Equities at Elara Capital.
In the midcap space, Biocon and Divi’s Laboratories were among the top performers in pharma space. “ Biocon’s stock price will rise in absolute terms over the next 60 days.This is because the stock has traded off recently, making short term valuation much more compelling. Stock catalysts include strong F2Q19 results driven by USD gains and biosimilar business, two potential EU launches and two EU approvals,” said Morgan Stanley in a report.
Analysts say weakening rupee helped IT and pharma companies gain during correction as they are mainly export oriented businesses. “Of late, the INR depreciation is also helping. Consumption stocks will continue to hold ground given the structural changes in consumption patterns. However, here we would like to go with large cap names as mid-caps in this sector have slow scalability and get into overvalue zone soon,” added Harendra Kumar.
In the small cap space, top performers include HEG, NIIT Technologies, Graphite India, VIP Industries, Atul Limited, Cyient, Future Lifestyle Fashion, Bajaj Electricals, Tata Elxsi and Lakshmi Machine Works.
With regard to Bajaj Electricals, Edelweiss expects it to log double-digit growth in consumer over FY18–20E.