Midcap stocks come alive in lifeless market
Jan 01 2014 , Mumbai
Smaller stocks to bridge gap in valuation with biggies: Experts
For the first time since 2006, the stock market saw a drop on the opening trading day of the year, with the benchmark Sensex giving up initial gains to end the day with a loss of 30.20 points, or 0.14 per cent. It was the first drop for the index on day one of the year since January 2, 2006, when the BSE benchmark had fallen 7.8 points.
But many midcap and smallcap stocks showed strength. As many as 60 of the 100 stocks in the CNX midcap index closed in the green, while 39 closed in the red. In the broader BSE midcap index comprising 217 stocks, 135 gained against 75 losers. Seven remained unchanged.
The BSE midcap index has gained 6 per cent over the last one month till
December 31 against 1.8 per cent and 2.1 per cent rise in Sensex and Nifty, respectively.
Wednesday’s biggest gainers of the CNX midcap index included Reliance Communications (6.04 per cent), HDIL (3.83 per cent), India Cement (3.08 per cent), Unitech (2.94 per cent), Karnataka Bank (2.83 per cent), Andhra Bank (2.71 per cent), Adani Enterprises (2.29 per cent), Syndicate Bank (2.11 per cent), IDBI Bank (1.96 per cent) and Reliance Infrastructure (1.82 per cent).
On Wednesday, realty stocks were in demand with the BSE realty index rallying 2.89 per cent in an otherwise lacklustre market. Other sectoral indices moved very little.
Midcap realty stocks saw sharp gains, with Sobha Developers rising 2.83 per cent, Puravankara Projects 2.75 per cent, Godrej Properties 8.77 per cent and DB Realty 16.89 per cent.
According to broking firm LKP, 56 stocks from the BSE midcap index have gained more than 10 per cent over the past one month, with top gainers rising more than 25 per cent. They included TVS Motor (38.3 per cent), Aurobindo Pharma (33.7 per cent), Bajaj Electricals (33.5 per cent), Apollo Tyres (33.2 per cent), Shoppers Stop (29.8 per cent), Indian Hotel (28.8 per cent) and Dewan Housing Finance Corporation (25 per cent).
“There will be good action in 2014 to bridge the valuation gaps of smallcaps and midcaps with largecaps. Largecaps are at rich valuations, leaving little room for fresh investment whereas midcaps offer enough opportunity to multiply your money in 2014 in specific cases,” said Kishor P Ostwal, CMD of CNI Research.
“We believe that the time has come for midcap and smallcap stocks to see a boom. We also believe that the political change will be a big driver to end the dry run in stocks that started in October 2008. Capacities are getting adjusted slowly as companies have spent almost five years now with expanded capacities, which is getting reflected in improved earnings,” he said.