Underperforming the benchmark indices for the fourth straight sessions, the midcap index has remained subdued so far in 2019 as well as in the last one month.
While the BSE Sensex and the Nifty 50 have gained 8 percent in CY19, the midcap index on the BSE has slipped 4 percent during the period. It has fallen 4 percent in the last month as well.
87 stocks in the BSE Midcap index gave negative returns in the last one month. Of these, Reliance Power fell the most, down 42 percent followed by Reliance Capital (29 percent), PNB Housing Finance (25 percent), Edelweiss Financial Services (24 percent), Reliance Infra (20 percent), and L&T Fin Holding (16 percent).
According to market experts, the fall in the midcap stocks has made the valuations attractive. With the improvement in business prospects, falling interest rates, low base effect and expectation of National Democratic Alliance (NDA) winning the 2019 Lok Sabha elections, analysts expect midcaps and smallcaps to gradually recover and do well in FY20 (post elections).
Slow business, tight liquidity and strict regulations have hurt midcap and smallcap stocks and impacted their valuation and growth in the last one year. Post correction in midcap stocks in FY19, from high of 25x on PE (price to earnings) the midcap index is now at trading at 14.9x (FY20 estimate)," said Kotak Securities in a report.
"Going forward, one can focus on midcaps having high earnings growth from a long term investment perspective. As hygiene it would be best to avoid companies where promoters have high pleading of shares," it said.
Reliance Power and Reliance Capital fell 40 percent and 29 percent, respectively, in the last one month after rating agencies downgraded Anil Dhirubhai Ambani Group (ADAG) companies in April.
PNB Housing also slipped 25 percent amid concerns over raising money to maintain comfortable capital adequacy. CARE Ratings placed the company’s ratings on "watch" and added to the losses.
Other stocks that gave double-digit negative returns include Kansai Nerolac, Adani Enterprises, MRF, Sun TV, LIC Housing, DHFL, IDBI Bank and Bank of India.
Motilal Oswal, Gruh Finance, ABB India and Gillette were the stocks that gave up over 10 percent in the last one month.
First Published: IST