Experts believe not only largecaps but also midcaps with good fundamentals and firm Q2 results can outperform broader indices in the coming quarters
The market momentum has changed completely since the announcement of several measures by the government as bulls have taken charge of Dalal Street after a steep correction from earlier record high levels seen in June.
The BSE Sensex and Nifty50 itself rallied more than 12 percent since September 20 when the corporate tax rate was cut by 10 percent. The BSE Midcap index rose nearly 12 percent, and the Smallcap index gained more than 6.5 percent in the same period.
In fact, the BSE Sensex touched a new high of 40,749.33 on November 8 while the Nifty50 is still around 100 points away from its earlier high of 12,103 in June.
But, if we take the performance of these indices since February 2018, largecaps have really been taking the lead with BSE Sensex rising 13 percent against Midcap index fell 14 percent and Smallcap lost 28 percent.
After a long period of underperformance following a sharp rally in 2016-2017, the broader markets are expected to catch up benchmark indices from 2020 onward as the government measures, lower interest rate etc may reflect in earnings. That is why the market started pricing in same well in advance, experts feel.
"The corporate tax cut and followed up strong buying in October has helped Nifty reclaim 12,000 levels though the economic downturn remains. Market usually starts rising up before the actual economy turns up. The post result market commentaries by management of companies regarding demand have not been as bad as expected," Vineeta Sharma, Head of Research, Narnolia Financial Advisors, told Moneycontrol.
"Any liquidity push or EPS upgrades will only create further room for the market to rise from these levels. Our 12-month target for Nifty is 12,400," she said.
Gaurav Garg, Head of Research, CapitalVia Global Research Limited- Investment Advisor, also feels that this rally is going to be there in the long term though there may be some correction in the short term.
"However, with good set of numbers from Q2FY20 along with easing tension on US-China trade war and Dow Jones reaching all-time high; we can expect a rally of 12-15 percent from current levels in next one and half years," he said.
Experts believe not only largecaps but also midcaps with good fundamentals and firm Q2 results can outperform broader indices in the coming quarters. Hence, this is the right time to accumulate midcaps, they feel.
Here are eight midcap ideas which could return 11-34 percent in the next one year:
Vineeta Sharma, Head of Research, Narnolia Financial Advisors
Can Fin Homes | Return: 21 percent
Growth continued to remain moderated amid the concerns over HFCs. However, Can Fin is well placed given the demand in lower ticket size segment. Improvement in demand and easiness in credit squeeze in HFCs will improve the AUM take off. Improvement in KARNATAKA region will further aid the growth. Decline in cost will support the margin to expand. Due to pressure in economy and slowdown in SME segment, assets quality continue to saw some blip in the self-employed segment. However, we don’t see any major impact on asset quality due to pressure in real estate segment as Can Fin's book is mainly towards the retail segment. Promoter Canara Bank is in talks to sale its stake which can have bearing on its share price.
Cochin Shipyard | Return: 15 percent
Cochin Shipyard is into the business of building and repairing ships. Company can build a wide variety of ships for the Merchant Navy, Ports, Island territories & commercial ships to national/international owners. Company has right of first refusal for the procurement of vessels by all govt. departments and agencies. CSL presently has a robust order book in shipbuilding and repair. Cochin Shipyard in May’19 signed Rs.6311cr contract with the Defence Ministry for construction of eight anti-submarine warfare shallow water crafts (ASWSWCs) for the Indian Navy. The first ship is to be delivered within 42 months from contract signing date and subsequent balance ships delivery schedule will be two ships per year.
Ajit Mishra, VP Research, Religare Broking
Marico | Return: 22 percent
We believe Marico has the potential to post double-digit revenue growth driven by a) product mix and innovating new products b) improvement in demand c) expansion in international markets d) maintaining leadership in key brands and e) gaining market share in core categories over the next 2-3 years. We recommend a Buy on the stock with a target price of Rs 451.
Subros | Return: 34 percent
We expect the passenger vehicle industry volumes to recover gradually going forward. Further, we believe that Subros is well placed to outperform the industry given its strong relationship with Maruti and Denso, increased share of businesses from OEMs, increased revenue share from non-PV business and adequate capacity in place. We recommend a Buy on the stock with a target price of Rs 321.
Voltas | Return: 17 percent
Voltas – India's largest room air conditioner player (over 24 percent market share) is set to deliver healthy growth given low AC penetration particularly in tier-2 and tier-3 cities and smaller towns. Further, enhanced product offerings (washing machines, refrigerators; etc) and widening distribution reach will drive long-term growth. We have a one-year target price of Rs 780.
Gaurav Garg, Head of Research, CapitalVia Global Research Limited- Investment Advisor
Torrent Power | Return: 11.5 percent
This stock has always outperformed its peers and clocked good set of Q2 numbers. We can expect a good upside from the current levels of Rs 292, and we can expect a target of Rs 330 in next one year.
Castrol India | Return: 20 percent
Stock can surprise as it was under pressure from last few quarters, and from current levels of Rs 154, we can expect 20 percent return in next 12 months.
Escorts | Return: 27 percent
Escorts can outperform the broader indices. After a big correction in automobile sector and all the negatives factored in the current price, we can see healthy upside in Escorts and target of Rs 825 in next one year can be expected.Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.