Despite recent rally, midcap index in the red for 2019; 60 stocks give negative returns

Even after rising over 6 percent in the last one month, the BSE Midcap index is still in the red in 2019 on a year-to-date (YTD) basis, with 60 stocks in the index giving negative returns in the given period. In comparison, the S&P BSE Sensex has gained 6 percent YTD.

25 stocks from the midcap index have fallen over 10 percent this year including Reliance Power, Reliance Infrastructure, Dewan Housing, IDBI Bank, NALCO and TVS Motor Company. MRF, Gruh Finance, Exide Industries, SAIL, Motilal Oswal, Natco Pharma, IIFL Holding were some other laggards in the index.

Reliance Power and Reliance Infrastructure have lost more than half of their value in 2019 falling 63 and 57 percent, respectively. Dewan housing lost over 40 percent whereas IDBI Bank was down 30 percent in the given period.

The market direction in the near-term will be a function of the general elections and the consequent political outcome, until then, it will be a period of high volatility.

Most analysts see a lot of value in the midcap space currently and believe that any correction in quality midcap companies with strong growth prospects should be considered as a good buying opportunity for long-term investors.

Motilal Oswal Securities believes that the broad underperformance of the midcaps is overdone and interesting bottom-up opportunities are now available in this space across sectors.

In the last one month, 75 stocks have risen, led by banking and financial stocks. Edelweiss Financial Services, Union Bank of India, IIFL Holdings, Bank of India, Canara Bank were the top gainers in the last one month, up in the range of 25-42 percent.

Among gainers, Godrej Properties rose the most, up 33 percent in 2019 followed by IDFC Bank, Oberoi Realty, GMR Infrastructure, RBL Bank and Muthoot Finance.

According to Sandip Raichura, Head of Retail at Prabhudas Lilladher, European issues have created an issue of growth for the rest of the world, it has partly led to the recovery in midcaps as emerging markets come back into focus after a disastrous 2018.

"Given that they trade at two-thirds of where they were one year ago, and that any strong growth domestically will flow into midcaps and small-caps first, a large part of this rally in the last month may be justified," he added.