The Nifty and Sensex may be talk of the town in the ongoing bull market, but it is the lesser known mid and small cap companies that have been delighting the investors.
Since Budget 2023, attention has shifted away from large cap stocks onto the smaller companies, many of which have justified the appreciation in their stock prices a matching growth in earnings.
The broad based nature of the equity rally is evident from the fact that 720 stocks delivered returns in excess of 100 percent, 755 stocks gained between 50 - 99 percent, and 622 stocks delivered returns between 25 percent and 49 percent.
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BSE Midcap index is up by 55 percent in the past one year. MSCI India Midcap Index (USD) has gained by ~37 percent while the MSCI EM Midcap index is up by 14.56 percent in the past one year. MSCI World Midcap Index (USD) has strengthened by 16.11 percent. This goes to show that even in USD terms the midcaps in India have outperformed its emerging markets and developed market peers.
Finance Term Lending companies were the top gainers from the BSE Midcap index with IRFC topping the chart. REC and Power Finance Corporation too have turned out to be multibaggers. Nineteen out of the xxxx BSE Midcap Index components managed to deliver returns in excess of 100 percent, with IRFC, REC, Power Finance Corporation, BHEL, SJVN, JSW Energy and GMR Airports being among the notable ones. The companies are some of the direct beneficiaries of the increased capex spending in infrastructure, power and railways, announced in the 2023 Budget.
Stocks in focus this budget:
Green Hydrogen:
How much will budgeted for the National Hydrogen Mission, which promotes hydrogen as a clean energy source will be of interest for the markets Some of the interesting names in this space are Reliance Industries, BPCL, Adani Green, CESC, BHEL, Advait Infratech and Waree Energies. Waree energies is an unlisted entity. In its mission towards net zero carbon emissions by 2070, the Indian government plans to reduce its dependency on fossil fuels. This can be achieved by increase the annual hydrogen production capacity to five million metric tonnes by 2030, as stated by the government.
Auto Component stocks:
Auto component industry is one that can benefit from the Government policy support be it ‘Make in India’, ‘Fame Subsidy driving EV transition’, or ‘PLI scheme to boost EV transition’. According to HDFC Securities, the sector is in a sweet spot. One of the main reasons for the optimism in the sector is the support of the government policies, in addition to operating tailwinds.
The auto ancillary stocks (83) that are components of BSE Midcap Index on an average delivered returns of over 72 percent since the budget 2023. This space will be interesting to watch. HDFC Securities likes SAMIL (Samvardhana Motherson International Ltd) for its inorganic growth possibilities and also because it may be a key beneficiary of premiumization trend in India. Sansera and Suprajit Engineering are the other two stocks from the sector that HDFC Securities believe will benefit from the sectoral tailwinds, premiumisation trend and conducive government policies.
Vehicle Scrappage Policy:
Vehicle Scrapping Sector is seen as sunrise sector in India. According to Monarch Networth Capital, MSTC Ltd is well positioned in an attractive emerging area of vehicle scrapping. The icing on the cake is its joint venture with Mahindra Group which is into vehicle scrapping, the Monarch report says. the report published by the institutional broker says. The broker states that India came up with a vehicle scrappage policy in 2021 but the implementation has been slow. Recent news articles indicate progress on this front as a few state governments have notified policies related to ELV certification and more will likely follow suit. MSTC will likely be a major beneficiary of this trend.
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Government introduced a voluntary vehicle scrappage policy in the Union budget 2023. The idea was to incentivise the old vehicle owners to scrap and replace them. Any announcement on vehicle scrapping policy will have a bearing on MSTC shares.
Power sector stock:
From the midcap space SJVN is one stock that will be in focus on the budget day. This multibagger power sector midcap stock is up by over 245 percent in the past one year. Brokerages are bullish on the counter owing to the proposed capacity expansion, improved revenue visibility and favorable sector dynamics.
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