The broader markets gained momentum in the last one month, with the BSE Midcap rising more than 4 percent.
The 10 percent cut in corporate tax rate seems to have played a key role in the revival of sentiment among midcaps, considering that the index declined nearly 10 percent in 2019 amid demand slowdown and liquidity issues.
In the BSE Midcap index, 21 stocks have risen over 10 percent, outperforming the benchmarks. Apart from the expected tax benefits, the stocks outperformed also due to likely stable earnings performance.
Stocks including Whirlpool, Berger Paints, ICICI Securities, Reliance Nippon AMC, Info Edge, 3M India, Colgate rose between 17-31 percent in the last one month. Concor, Indian Hotels, ABB India, Sun TV, GSK Consumer, Biocon, Kansai Nerolac, Motilal Oswal, P&G and Adant Enterprises were up over 10 percent each.
The BSE Midcap, however, underperformed Sensex, which rose 6 percent during the last one month. Major losers included Indiabulls Ventures, PNB Housing Finance, Indian Bank, RBL Bank, and Glenmark Pharma, down between 20-50 percent.
According to analysts, quality midcap stocks see value-buying by investors.
Nilesh Shah, MD of Kotak Mahindra Asset Management Company, said that the focus now is on small and midcap stocks where valuations still remain attractive and which are likely to be the biggest beneficiaries of improved liquidity in the economy. “It is more bottom-up company-specific rather than top-down sector-specific,” he said.
However, Naveen Kulkarni of Reliance Securities believes that investing in the current environment is clearly based on cashflow visibility and growth and that stocks offering strong cash flows will continue to see increased allocation. He said largecaps typically are more mature companies and have better cash flow profile than midcaps and will be preferred in the current environment.
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