Mid, smallcap picks: Ashoka Buildcon, Colgate among analysts’ top bets
Stock market today: The broader market has outperformed the Nifty significantly during Samvat 2079. During calendar year 2023, while Nifty’s year to date returns are close 7.5 %, Nifty Midcap year to date return is close to 28.9% and Nifty Small cap 100 year to date return is around 38%. However after this huge outperformance valuations of mid and small caps are stretched and they are now trading at a premium to large caps say analysts. This leads analysts to be cautious on mid-cap and small cap space as they remain selective amongst their Stock picks.
Many small cap mutual funds like Nippon Small Cap Fund have flagged the high valuations by stopping bulk investment in their funds. It would be risky to invest lump sum in mid and small caps now, said Dr V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services. However, SIPs in mutual funds can be continued he added. Of course, there will be individual winners in the broader market says Geojit Financial Services Dr Vijayakumar, who though feels that IT, mid caps will outperform large caps.
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Ambreesh Baliga, Independent market expert said that the momentum in the mid and small caps is keeping investors interested in the space. However the valuations are stretched now.
The midcap and smallcap stocks are likely to deliver positive returns in Samvat 2080, we feel that large caps are better placed vis-à-vis mid and small cap companies, said Manish Chowdhury, Head of Research, StoxBox. Despite the corporate earnings growing in the last two years, the index returns of benchmarks (Nifty and Sensex) does not commensurate with the earnings growth, feels Chowdhury, thereby placing them favorably in the year ahead.
Some of the small and mid caps recommended by Chowdhury include Ashoka Buildcon and Colgate-Palmolive .
Ashoka Buildcon: The private sector is emerging as the key player across various infrastructure segments, from roads and communication to power and airports. Ashoka Buildcon’s robust order inflows, latest technology and innovative construction practices and better project execution, despite inflationary challenges could still deliver healthy financial performance feel Chowdhury. The asset monetization program continues to substantiate Ashoka’s full cycle credentials and efficient use of capital to develop, construct, commission, operate and sell investments. On the valuation front, Choudhury said that, we are thus positive about the long-term prospect of the company and value it at a Price to earnings of 13 times based on FY23 earnings to arrive at a target of ₹163 per share.
Colgate Palmolive (CMP: 2,117) is another pick by Chowdhury It is to be noted that 80% of the urban population is still not brushing twice and 55% of the rural population does not use toothpaste daily, implying a huge growth opportunity in oral care business, said Chowdhury. In the quarter gone by, the business also saw green shoots in rural recovery and recovery in its volumes. Further, it is also looking for relevant opportunities from the global portfolio which can be introduced in the domestic markets. With the entry of new CEO Ms. Prabha Narasimhan (exHUL head in the beauty and personal care segment) and her strategies to further augment the business, Chowdhury said that we remain positive on the overall growth story. On the valuation front, We are thus positive about the long-term prospect of the company and value it at a Price to Equity of 50 times based on FY23 earnings to arrive at a target of ₹2,500 per share.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions
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Updated: 13 Nov 2023, 02:58 PM IST
