Nifty, Midcap, as well as Smallcap indices, have recovered around 30 percent from March lows.
Benchmark indices as well as broader markets rebounded in the month of June after facing massive sell-off in the previous few months due to the spread of the coronavirus pandemic. Nifty, Midcap, as well as Smallcap indices, have recovered around 30 percent from March lows.
For the month of June, broader markets outperformed the benchmarks with the Nifty Midcap and Nifty Smallcap indices rising 11 percent and 16 percent, respectively. In comparison, the Nifty and Sensex was up around 8 percent each in this month.
"The breadth, as well as quantum of this recovery rally, stands out, in our view. In our past research, we had argued that high-quality stocks across and irrespective of market caps lead recoveries from bottoms. This played out in the first half of this recovery rally. The rally added breadth in the latter half, with small and medium indices almost matching Nifty from the bottom. It is the quantum and the curve of this rally that is surprising," Edelweiss said in a recent report.
However, on a YTD basis, the Nifty Midcap and Nifty Smallcap were down 13 percent and 20 percent, respectively as against a 14 percent fall in the benchmarks.
Only 11 stocks in the Nifty Midcap100 index were in the red in June. Among gainers over 8 stocks rose above 50 percent in this period while around 60 stocks posted double-digit returns.
IDBI was the top gainer in the midcap segment, up over 110 percent, while Future Consumer, Quess Corp, Indiabulls Ventures, Bank of India, HUDCO, Future Retail, and Jubilant Life jumped over 50 percent each.
In the smallcap index, Dish TV, Suzlon Energy, TC-16 Broadcast, Trident, and Karur Vysya Bank were up between 50 percent and 85 percent. Other gainers included IRB Infra, CPCL, Kaveri Seed, EID Perry, KEC International, Cyient, Aster DM Health, Balrampur Chini, and Vakrangee, up over 35 percent each.
According to Nilesh Shah, MD & CEO of Envision Capital, valuations of midcaps are far more attractive than those of large caps.
"Valuations and PE (price to earnings) multiples are significantly lower than what we have seen them either during their peaks in early 2018 or even during the peak at the start of this year," he said.
Adding: "Over the next few years, you are going to see a strong resurgence in pockets of excellence in the midcap space. Once issues around COVID and all of that are behind us, that is the space to watch out for."