1 of 5 BSE500 stocks have hit fresh 52-week high in December

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The Nifty50 that rallied in double digits in November carried the momentum to December as well, with the index rising more than 4 percent to gallop past 13,500, so far. The S&P BSE Sensex has also gained more than 4 percent during the month that saw the benchmark hit 46,000 for the first time.

The real action, however, has been in the small and midcap space, where one of five stocks in the BSE500 index has hit a new 52-week high. IFCI, Shipping Corporation, IFB Industries, TVS Srichakra, Wockhardt, Zensar Tech and Rain Industries are among the 116 BSE 500 stocks to hit the new high.

Most of the action was in the small and midcap space. Broader markets are catching up as the liquidity wave is taking every stock in its stride, experts say but advise caution, as risk-reward may not be favourable for many stocks.

Foreign institutional investors (FIIs) have already poured in more than Rs 26,000 crore in December against Rs 65,000 crore in the previous month.

“There is no doubt it's a bull market, but this is not the time for aggressive fresh buying on run-up stocks. At current levels, the risk-reward ratio may not be favorable in many stocks from a short to intermediate-term perspective,” Umesh Mehta, Head of Research, Samco Group told Moneycontrol.

“Mid and small-cap stocks have more to gain as the economy recovers and grows. Investors are advised to pick fundamentally strong mid and small caps and hold them during volatile times to reap good rewards,” he said.

Out of 116 stocks, 48 have hit an all-time high in December. These include Dixon Tech, Avenue Supermarts, Info Edge, Marico, Adani Ports, Deepak Nitrite, Tata Investment, Supreme Industries and Godrej Industries.

Experts are of the view that selective mid and smallcaps are gaining traction but it will be wise for investors to book partial profits.

“I believe broader indices might continue to outperform and investors should chase momentum in only selective small and midcap stocks which are hitting 52-week highs,” Gaurav Garg, Head Research, CapitalVia Global Research Limited told Moneycontrol.

Investors should book profits at regular intervals and shift their trailing stop loss in order to preserve profits, he said.