10 mid-cap stocks gain 7.5%-16% this week as Indian stock market scales new peak
The Nifty 50 closed at 20,969.40, up 68 points, or 0.33%, while the Sensex finished the day up 304 points, or 0.44%, at 69,825.60. The BSE Mid-cap and Small-cap indices also hit new all-time highs during the session, rising to 35,523.69 and 41,548.63, respectively. However, the BSE Mid-cap index ended the day at 35,290.91, down 0.16%.
The Sensex gained 3.47% this week, while the Nifty 50 gained 3.46%, as per trendlyne data.
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Nifty 50 reached new highs in five of the six trading sessions since Friday, December 1. Several factors influenced the market this week, including the unanimous decision by the Monetary Policy Committee (MPC) of the RBI to maintain the policy stance of “withdrawal of Accommodation” and keep the repo rate unchanged at 6.5%. Further, the hike in the RBI’s real GDP growth projection for FY24 from 6.5% to 7%.
Additionally, some of the other key factors driving the market were solid GDP data—such as India’s 7.6% Q2 GDP growth, which significantly exceeded forecasts—and exit polls from the five state elections, which indicate political stability ahead of the general election in 2024.
The coming data-centric week will centre on important releases, such as US and Indian inflation figures. While US inflation is predicted to stay constant, inflation in India is predicted to increase. While expansion is anticipated, Indian industrial and manufacturing production is also anticipated. But the result of the eagerly anticipated Fed policy meeting will be crucial in determining how the market shapes up further, although the Streets anticipates the end of the tightening cycle.
“The market achieved an all-time high, driven by robust domestic GDP growth. Despite the RBI maintaining policy status quo, an upgraded GDP growth forecast for FY24 (6.5% to 7%) boosted investor confidence. Measures to address the liquidity deficit, including the reversal of SDF & MDF facilities, positively impacted financials, leading to a 5% gain in Nifty Bank for the week. IT, consumer, auto, and realty sectors performed well due to valuation comfort, festive momentum, and a strong uptick in residential sales. Mid & small caps continued to outperform, driven by a healthy economic outlook, strong Q2 earnings, and corrections in oil prices.
Investors should be mindful that achieving the RBI’s 4% CPI inflation target may take time. Concerns arise from reduced rabi sowing and declining reservoir levels, signalling a potential rise in foodgrain prices. This impacted FMCG stocks negatively, contrasting with positive performances in most other sectors,” said Vinod Nair, Head of Research at Geojit Financial Services.
Stellar Rally in Mid-cap stocks continue…
Analysts say that this year has been very focused on the broader market and that there has been a lot of participation in it. The mid-cap and small-cap indices have outperformed the benchmark indices this year. This week, BSE Mid-cap increased by 2.04%, as per trendlyne data.
This week, the top 10 gainers in the BSE Mid-Cap indices were: Patanjali Foods Ltd (up 16.3%), Indian Overseas Bank Ltd (up 7.7%), ACC Ltd (up 12.5%), NHPC Ltd (up 12.1%), Hindustan Petroleum Corporation Ltd (HPCL) (up 9.3%), Tube Investments of India Ltd (up 8.6%), REC Ltd (up 8.4%), LIC Housing Finance Ltd (up 8%), Indian Overseas Bank Ltd (up 7.7%), and Union Bank of India Ltd (up 7.7%), as per trendlyne data.
This week, shares of Steel Authority of India (SAIL) Ltd, Power Finance Corporation Ltd, IDBI Bank Ltd, MRF Ltd, Schaeffler India Ltd, ICICI Securities Ltd, Bank of India Ltd, JSW Energy Ltd, Indian Bank Ltd, Indian Railway Catering & Tourism Corporation Ltd, Canara Bank Ltd, and Container Corporation of India Ltd were up 5% to 7.4%, as per trendlyne data.
Brokerage View
According to domestic brokerage Nuvama Institutional Equities’ most recent report on Small and Mid-cap Strategy, since March 23, in particular, mid-cap indices have increased by 47%, outpacing the Nifty 50 by 27%. It believes that even though mid-caps are more costly, they ought to perform somewhat better than small-caps.
Although mid-cap companies are more expensive than small companies (20x P/E on average over the last seven years), the brokerage notes that over the last five years, mid-cap companies in India have grown in size and profile. It’s also not encouraging that there is a mid-cap premium of 28% to NIFTY valuation (compared to the average 7-8%). The brokerage believes that it is highly unlikely that there will be any further outperformance against large caps. On the other hand, mid-caps are not expected to perform as poorly as small-caps in the event of a market downturn.
“Starting CY24, we estimate that mid-cap market cap definition will be USD2.8-8bn (applicable to domestic mutual fund mid-cap schemes). This is a sizeable jump from the USD1.2-3.5bn, just four years back. The higher market cap range potentially lends likelihood of the first 50-75 mid-cap stocks being treated as large-caps by investors, and hence mid-cap draw downs are unlikely to be as drastic as seen in history. Moreover, mid-caps have had a good track record in terms of become large-caps,” the brokerage said.
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 09 Dec 2023, 01:32 PM IST
