Even as the benchmark indices scale new highs, much of the action is taking place in mid and small-cap stocks.
The Nifty Midcap 100 Index recently reached a record high and surpassed the 35,600 mark. Over the past three months, the index has risen almost 20 percent compared with a 10 percent increase in the Nifty.
According to CLSA, the 100-stock index on the National Stock Exchange may still have a 13 percent upside potential. CLSA analyst Laurence Balanco advises investors to focus on midcap stocks for potential outperformance, citing current market conditions and the breakout in the midcap segment.
Moneycontrol compiled a list of five midcap stocks with the maximum return potential, based on coverage by at least 10 analysts.
Federal Bank: Of 40 analysts covering this stock, 36 have given it a ‘buy’ rating, suggesting a potential upside of more than 35 percent from the current market price (CMP).
JPMorgan recently initiated an ‘overweight’ rating and viewed the bank's share price as having a positive balance of risk-reward. The primary attraction of the stock, according to the brokerage, is its relatively stronger liability franchise compared to its midcap bank peers, especially in an environment of tight loan and deposit ratios (LDR).
Although the stock has outperformed the Bank Nifty over the past year, it has faced some struggles on a year-to-date basis. Valuations are supportive, at 1.1 times the FY24 price-to-book value compared to midcap peers.
Max Financial Services: Of 15 analysts covering the stock, 14 have given it a ‘buy’ rating, according to a Bloomberg consensus rating, suggesting a potential upside of 35 percent. Yes Securities said the company's relatively stable, non-cyclical business model, reflected in its lower linkage to equity markets and high-quality underwriting standards over an extended period of time, is the reason for initiating coverage on this stock.
Coromandel International: Of 13 analysts covering the stock, 11 have given it a ‘buy’ rating, according to a Bloomberg consensus rating, suggesting a potential upside of 26 percent. The company is a leading agri-solution provider, offering diverse products and services across the farming value chain. It operates in two major segments: nutrients and other allied businesses, and crop protection. Additionally, the company has announced its entry into specialty and industrial chemicals, contract development, and manufacturing businesses. With its robust position in India's phosphatic fertiliser market, strong operating efficiency, diversified product portfolio, and robust balance sheet, the company seems well-positioned to capture opportunities in the Indian market.
Indian Bank: The stock has mustered gains of almost 100 percent over the past year. However, on a year-to-date basis, it has declined by more than 5 percent. Currently, 10 out of 11 analysts have a ‘buy’ rating on the stock and suggest a potential return of about 26 percent. The bank benefits from stable net interest margins and a decline in provisioning. The management expects loan growth of 10-12 percent for FY24. The stock is still expected to deliver positive returns.
Sun TV Networks: Of 19 analysts covering the stock, 13 have a ‘buy’ rating and suggest a potential upside of almost 25 percent. A leading regional broadcaster in India that owns and operates a bouquet of 32 TV channels prominently across the southern market. The company, which is touted as an acquisition candidate, has a low dividend pay-out with a mountain of cash, raising fears of capital misallocation. Events surrounding acquisition and/or increased pay-out may drive a significant re-rating of the stock, according to Dart brokerage.
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