After the sharp fall on August 31, the Indian market rebounded in the next trading session on as the AGR verdict and announcement of auto sales numbers eased some pressure.
The gains were broad-based as the secondary barometers BSE Midcap and Smallcap also logged healthy gains.
Market analysts are of the view that the mid and smallcaps may continue to rise, along with the market benchmarks, even as volatility will persist and occasional consolidation will occur due to macroeconomic and geopolitical factors.
"Further re-opening of the economy along with ample liquidity scenario is adding confidence to invest into mid and smallcaps. A large section of largecaps are trading at premium valuations which also increases the attractiveness towards mid and smallcaps, as it looks to sustain this outperformance in the short to medium term," said Vinod Nair, Head of Research at Geojit Financial Services.
The occasional correction in the market will keep the indices healthy in terms of valuations and will offer good opportunities to enter the market fo those who have missed the bus.
The BSE Midcap index is a shade away from turning positive for the year 2020 while the Smallcap index is tradding in the green.
The S&P BSE Midcap index closed at 14,967.83 on December 31, 2019, while the S&P BSE Smallcap index ended at 13,699.37 on the same day. Both the indices fell below 10,000 levels in March but managed to get back towards 14,832 on the Midcap index, and 14,413.32 on the Small-ap index, as on September 1, 2020.
"Coronavirus still poses a significant threat but recent visibility of the COVID vaccine provides confidence to the market. We expect the high quality of beaten-down stocks would out-perform the largecap stocks," said Amarjeet Maurya, AVP - Mid Caps, Angel Broking.
Mid and smallcaps are playing catchup with largecap stocks after underperforming rather severely over the last few years.
However, analysts warned to not get carried away and select those stocks from the mid and smallcap pockets that have the potential to endure the volatility.
Here are 8 such stocks that can give healthy returns in the one-year timeframe. Take a look:
Analyst: Amarjeet Maurya, AVP - Mid Caps, Angel Broking
Radico Khaitan is a leading manufacturer of Indian made foreign liquor. It has a strong pan-India presence with growing sales in the premium brands like Magic Moments Vodka, 8 PM Premium Black Whisky etc.
Going forward, the analyst expects the stock to report healthy profitability, mainly due to strong sales growth in the premium product segment (brand extension and launches in new states) and reduction in interest cost.
KEI Industries is engaged in the manufacturing and supply of power and other industrial cables.
The company is also engaged in engineering, procurement and construction (EPC) business.
Going forward, the analyst expects KEI Industries to report healthy top-line and bottom-line growth mainly due to a higher order book (nearly Rs 3,000 crore) execution in the EPC segment; growth in EHV business and higher exports.
Hawkins Cookers operates in two segments i.e. pressure cookers and cookware. Over the last two years, the company has outperformed TTK Prestige (market leader) in terms of sales growth of nearly 13 percent against nearly 4 percent in the cookers and cookware segment.
Cooking gas (LPG) penetration has increased from 56 percent in FY2014 to nearly 90 percent currently, which would drive higher growth for cookers and cookware compared to the past.
Going forward, the analyst expects the company to report healthy top-line and bottom-line growth on the back of government initiatives, new product launches, a strong brand name and a wide distribution network.
Analyst: Vinod Nair, Head of Research at Geojit Financial Services
Mold Tek Packaging is expected to capitalise on long-term growth opportunities aided by higher volumes from increasing acceptance of IML in paint and strong growth momentum in the F&F segment.
Further, the ramp-up of volumes from new plants (Mysore & Vizag) and strong client additions in the FMCG segment are margin accretive.
Focus on client addition in E-commerce, pick-up in seaway business, demand from warehousing space, faster adoption of e-way bill and a gradual pick-up in the auto sector will drive growth, said the analyst.
"We remain positive on TCI given its strong presence in warehousing space, multimodal logistics services and supply chain management," said the analyst.
The above-average rainfall seen in the country so far is expected to continue in the current quarter. Hence, the analyst expects the company to maintain its volume growth in the fertiliser segment over the next few quarters.
The increased focus on the crop protection business augurs well for the company and the analyst expects new launches and enhancement in R&D to propel this segment as well as improve overall margins.
As per IBEF, natural gas consumption is expected to grow 4.3 percent CAGR to 143mnt by 2040 against crude oil’s CAGR of 3.6 percent.
The analyst expects the current volume growth (65 percent in August) to pick up as commercial activities and movement of vehicles have gradually picked up.
"Owing to the regulatory push towards relatively cleaner fuels like natural gas, we remain optimistic on the stock and reiterate our 'buy' rating on the stock with a revised target price of Rs 1,180 based on 14 times FY22E adjusted EPS," said the analyst.
The Q1 FY21 order book (including L1) stands at Rs 24,500 crore (2.1 times TTM revenue) and provides strong visibility for the coming years, said the analyst.
The analyst expects railway, international T&D and civil business to continue to outperform due to improved traction in order inflows and approvals for EPC projects.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.