BackNifty Midcap 100 hits life-time high; Chalet Hotels, Nazara Technologies among key midcap stocks to watch out for
The Nifty Midcap 100 index has surged more than 27% this year so far, while the Nifty Smallcap 100 index has jumped over 30%. Both the indices have significantly outperformed the benchmark Nifty, which is up by 8% during the same period.
PremiumThe rally in midcap and smallcap shares is showing no signs of slowing down. The Nifty Midcap 100 index gained a percent to hit an all-time high, riding past 40,000-mark on Tuesday led by a strong bullish momentum in midcap stocks.
Among midcap index constituents, Devyani International jumped over 8, Trident and IRFC rallied over 7% each, Bank of India and Zee Entertainment shares gained over 4% each, while Petronet LNG, Jubilant FoodWorks, Tube Investments of India, Max Healthcare Institute, Adani Power, Aurobindo Pharma, OIL India, among others were up anywhere between 2% to 3% each.
The Nifty Midcap 100 index has surged more than 27% this year so far, while the Nifty Smallcap 100 index has jumped over 30%. Both the indices have significantly outperformed the benchmark Nifty, which is up by 8% during the same period.
The Nifty Smallcap 100 index also hit a record high. Among stocks, Raymond rallied over 10%, Cyient, Tanla Platforms, Karur Vysya Bank, IDBI Bank, Praj Industries, Century Textiles, CDSL, Amara Raja Batteries, CAMS, HFCL, among other jumped in the range of 3% to 7%.
Strong earnings growth, improving performance, foreign fund inflows and robust macroeconomic situation have been key factors behind the rally in midcap stocks.
“The midcap segment is experiencing a significant upswing due to several key factors. Foremost among these is the robust economic outlook in India, which is fueling investor optimism. This positive sentiment is further amplified by a substantial influx of domestic liquidity actively seeking opportunities in the market," said Parth Nyati, Founder at Tradingo.
Notably, midcap and smallcap mutual funds are currently witnessing a surge in inflows as investors flock to these segments. Moreover, Portfolio Management Services (PMS), High Net Worth Individual (HNI) investments, and innovative products like Smallcase are all contributing to the growing momentum in the midcap and smallcap space, he added.
Over the last nine months, the Indian stock market has witnessed broad-basing. From being entirely dominated by a narrow basket of quality large cap stocks of select sectors, markets have broadened with the participation of other sectors too during the last eight months, as per a report by brokerage firm Motilal Oswal Financial Services.
Midcap and smallcap stocks saw a jump in their market cap contributions since the previous Nifty peak of December 2022. The rally in Nifty Midcap 100 constituents was skewed more towards the top 15 companies in CY23YTD, the report said.
Midcap stocks in hotels and education sectors have seen a decent performance on the back of strong fundamentals.
“The rally in midcap hotel stocks is likely to continue as hotel occupancy will pick up with events like G20 and ICC ODI Cricket World Cup going ahead. The demand supply mismatch in the sector will continue," said Jinesh Joshi, Research Analyst, Prabhudas Lilladher Pvt Ltd.
Joshi is also bullish on the education sector and expects stocks like S Chand & Company and Navneet Education. He sees the stocks are ripe enough for a ride over the next 2-3 years. He believes the New Education Policy will lead growth in the publication business and drive volume delta and pricing benefits for these companies.
Meanwhile, he is also positive on the multiplex space amid a slew of upcoming new movie releases which are expected to drive further growth in the sector.
Among midcap stocks to watch out for, Joshi expects Chalet Hotels, S Chand and Company, Navneet Education, Nazara Technologies and Safari Industries to see decent growth going ahead.
Meanwhile, Gaurang Shah, Senior VP, Geojit Financial is positive on midcap IT, FMCG, banking, auto ancillaries and hospitality sectors.
He said investors sitting on decent gains in midcap stocks can book profits. To pick a few smallcap and midcap stocks, he selects CIE Automotive India, HEG and Tanla Platforms.
Also Read: Stocks to buy: Lupin, Federal Bank, Ashok Leyland among top midcap stock picks by Axis Securities
However, analysts believe that after a strong catch-up by midcaps and smallcaps in the last couple of months, the margin of safety at current levels has reduced as compared to largecaps.
"The broader market currently exhibits signs of being overheated, with a limited margin of safety in the short term. This heightened risk is underscored by the fact that any negative catalyst could potentially trigger significant profit-taking. It's noteworthy that the market appears to be disregarding the adverse impact of a weak monsoon at the moment.
Furthermore, numerous stocks are trading at significantly elevated valuations compared to their historical averages. Consequently, investors would be prudent to exercise caution in the near term, as these elevated valuations could make them susceptible to market corrections," Nyati said.
Nevertheless, he believes the overall outlook remains optimistic and hence, it becomes important to maintain a long-term perspective.
“While the short-term environment may be characterized by volatility and potential downside risks, the fundamentals supporting the market's growth potential over the long run remain intact. Therefore, strategic investors should continue to focus on their long-term investment objectives while staying vigilant in the current market conditions," he added.
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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