BackSmall- and mid-caps soar as investors embrace risk
BSE's Mid-Cap Index hit a six-and-half year high and the Small-Cap Index tested its highest level in more than three-and-half years on Tuesday
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Mumbai: Shares of auto parts maker Amtek Auto Ltd have more than tripled thus far in 2014, the highest among mid-cap stocks.
Shares of Greencrest Financial Services Ltd, not traded between April 2012 to May 2013, have risen more than ninefold, the highest among small-cap stocks.
The two are representative of a strong rally in small- and mid-cap stocks: 222 of the 238 stocks that constitute the S&P BSE Mid-Cap Index and 420 of the 456 stocks that make up the exchange’s Small-Cap Index have delivered positive returns this year. Of them, 24 mid-cap and 111 small-cap stocks have seen their prices at least double.
The S&P BSE Mid-Cap Index hit a six-and-half year high and the S&P BSE Small-Cap Index tested its highest level in more than three-and-half years on Tuesday.
Analysts attribute this to a growing belief that the new Narendra Modi-led National Democratic Alliance government will revive a flagging economy; the return of retail investors to the market; and an increased appetite for risk among such investors.
The S&P BSE Mid-Cap Index, which has risen 40.7% thus far this year, rose to as much as 9,454.69 points on Tuesday, its highest level since 15 January 2008. The S&P BSE Small-Cap Index has gained 57.6% year to date. It climbed to as much as 10,346.77 points in the day, a level last seen on 24 November 2010.
Mid-caps and small-caps are the flavour of the season, said an analyst.
“Frontline stocks may not see the spectacular gains seen recently anytime soon. But the mid-cap and small-cap space is getting attractive," said Alex Mathews, head of research at retail-focused brokerage Geojit BNP Paribas Financial Services Ltd. “Retail investors are getting more aggressive and their interest in this category is very high. People are willing to take more risk now. There is confidence that on the economic front, things are set to improve."
In terms of pricing, small- and mid-cap stocks are definitely more attractive than large-cap ones.
“After five tumultuous years for Indian equities as an asset class, we are at the onset of a new multi-year bull market," Amar Ambani, head of research at India Infoline Ltd, said in a note on 30 June.
“We believe that in a bull run, quality mid-caps can outperform large caps substantially and investors should increase weightage to mid-caps in their long term portfolio," Ambani said.
Among mid-cap stocks, PMC Fincorp Ltd has delivered a 223.6% return on stock price this year. And stocks of Prism Cement Ltd, Suzlon Energy Ltd, National Buildings Construction Corp. Ltd, Rajesh Exports Ltd, Unitech Ltd, Edelweiss Financial Services Ltd, TVS Motor Co. Ltd, Bharat Electronics Ltd, Ashok Leyland Ltd and IIFL Holdings Ltd have at least doubled.
Among small-cap stocks, shares of Ahluwalia Contracts (India) Ltd and Premier Capital Services Ltd have surged more than four-fold this year.
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