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The Midcap Index performance was resilient in 2021 despite Covid disruption with the index (+46%) outperforming Nifty (+24%). Likely domestic cyclical recovery and global liquidity could aid midcaps in 2022, said Jefferies in a note on Monday.

The brokerage has recommended a bottom-up approach and its top stock picks in the midcap space are Crompton with target price of 605, Dixon Technologies (target price: 6,450), Kajaria Ceramics (target price: 1,570) and Supreme Industries (target price: 3,130), for their strong brand franchise, cost control, premium launches and entrenched reach.

In 2022, the key focus themes could be housing upcycle - to benefit building materials, B2C resumption, formalization (Electricals, Pipes, Tiles), Indigenization push, PLIs (production-linked incentive schemes) and input cost trend and price hikes (market leaders to benefit), as per Jefferies.

“In 2022, we foresee robust housing activity in both urban (projects) and rural/semi-urban (independent housing). Despite escalating input costs, consumers are not deferring offtake much, as project completion timelines are sacrosanct," the note stated. 

Also, the government measures such as sanitation, affordable housing, piped drinking water to all by 2024 and rural electrification - could benefit building materials (Kajaria, Supreme Ind, Astral Limited) and electricals (Havells, Crompton, V-Guard, Finolex Industries).

During the pandemic, unorganized players faced multiple constraints eg: raw material sourcing (sharp commodity spike), liquidity and working capital issues, funding, weak balance sheet etc. This could entail further market share gains by key organized leaders. (eg: Crompton, Havells, Supreme Industries, Kajaria).

Additionally, Jefferies believes key drivers for Indian EMS market could be competitive costs, larger OEMs outsourcing production to focus on branding, import restrictions and PLI schemes, from which it believes stocks like Dixon Technologies and Amber Enterprises could benefit.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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