Resurgent midcaps & smallcaps in line to scale new peaks

Mumbai: Will mid- and small-cap stocks continue to outshine their large-cap peers in the months ahead? Brokers and analysts are placing their bets on these smaller companies to be outperformers as they are considered beneficiaries of a recovery in the economy.

Mid- and small-cap stocks have already outperformed bluechips in the past one year. But there is more steam left in the rally, say analysts. “When there is a broader rally in the market, mid- and small-caps tend to do better than large-caps. That is very much possible going forward,” said Hemang Jani, head of equity strategy- broking and distribution at Motilal Oswal. “There can be outperformance in the broader market if economic revival continues.”

Four of the top 5 midcap gainers are from Adani Group — Adani Green Energy, Adani Enterprises, Adani Transmission and Adani Power which have rallied 277-827 per cent since March 24. In the small-cap index, Majesco, Tanla, Intellect Design, Subex and Adani Total Gas have surged 822-2,871 per cent.

“The structural changes will have far reaching implications be it corporate tax cuts, capex push or PLIs. If these reforms are executed timely then our economy will go through more broad-based growth,” said Vinit Sambre, head of equities, DSP Investment Managers. “While short-term volatility may be there, the long-term outperformance in midcaps will continue,” said Sambre.

“We like AU SFB and NBFCs such as Shriram Transport and Chola. We like JK Cement and Birla Corp in cement and in consumer durables we like Havells, Voltas, Whirlpool and Crompton. We are extremely positive on them for one to two years,” said Jani.