Top smallcap, midcap stocks to buy: Five high-conviction stocks set to gain in current volatile market

Bulls took over the Indian share markets and pushed the BSE Sensex and Nifty 50 over 7 per cent higher in July. The broader market too participated in this rally with equity benchmarks. S&P BSE MidCap and S&P BSE SmallCap indices gained over 5 per cent last month. Research and brokerage firm Enkay Global Financial Services has listed out a few small and mid-cap stocks which have the potential to gain and offer decent returns. The list includes stock names such as Birla Corporation, Escorts, Granules India, Persistent Systems, and Varun Beverages.

The broader market outperformed the equity benchmarks with a gain of up to 0.75 per cent. The S&P BSE MidCap index was up 0.51 per cent or 71 points to trade at 13,928, while S&P BSE SmallCap index was ruling at 13,417, up 100 points or 0.75 per cent in afternoon deals on Wednesday. In comparison, S&P BSE Sensex was trading flat at 37,699.

Birla Corporation: The brokerage firm has a ‘buy’ rating to the stock. Emkay Global Financial Services believes that the valuation multiple for Birla Corporation will re-rate gradually as the company continues with capacity expansion plans. Birla Corporation derives 43 per cent of its sales volumes from the Central markets (26.6% in UP and 16.6% in MP), 25% from North markets and 29% from the East. “Incentives from various state governments should boost EBITDA by 12-16% till FY23E,” it added.

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Escorts: Shares of Escorts were trading 4.40 per cent higher at Rs 1,170 apiece in afternoon deals. The stock quoted the day’s high of Rs 1,174 and low of Rs 1,125.40, so far. On the back of partial recovery of lost volumes of March and April, and improvement in customer sentiments, tractor volumes have recovered with positive growth over the past three months. “We expect volume momentum to sustain ahead, supported by a low base, pent-up demand and better rural sentiments. Escorts is a key beneficiary of the uptrend in Tractors,” Emkay Global said in a report. It has given a ‘buy’ rating to it.

Granules India: Shares of Granules India hit a fresh 52-week high of Rs 319.90 apiece in Wednesday’s volatile trade. The brokerage firm maintained a ‘buy’ rating to the stock. The company is trying to course correct, promoter pledge is down from 63 per cent to 8 per cent over the last few quarters. “Following capacity additions, the business momentum is strong, with revenue/EBITDA growth of 20%+/35% in FY20. We expect the momentum to continue,” it said.

Persistent Systems: The company’s share price made a fresh 52-week high of Rs 1,040 apiece in the previous session, rising over 147 per cent from March lows. the brokerage firm sees the scope for ‘upside risks to estimates’ and potential re-rating, given the relative discount to peers. It recommended to buy Persistent Systems as the company’s business continues to rebound, led by initiatives undertaken by the new leadership.

Varun Beverages: Shares of Varun Beverages gained over 4 per cent to hit day’s of Rs 747.90 apiece so far in the trade. The brokerage firm iterated a buy rating to the stock. “Visible market share gains opportunities and scope of distribution expansion in the healthy growing Juice category drive above industry growth expectations,” Emkay Global said. It also added that best-in-class operational efficiencies in India provide a competitive edge to the company.

(The stock recommendations in this story are by the respective research and brokerage firm. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)