The S&P BSE Sensex reached another milestone by touching a record high of 40,816 on November 20, but experts feel that the real wealth could now be generated in small & midcaps which are in a bear market.
The S&P BSE Smallcap index is down by about 34 percent from its record high of 20,183 registered on 15 January 2018 while the S&P BSE Midcap index witnessed a fall of little over 19 percent from the high of 18,321 recorded on 9 January 2018.
Experts feel that market valuation look stretched and the smart money would now chase stocks which have been beaten down but still offer growth potential as the tide reverses or in other words earnings shows signs of recovery which could possibly take another two quarters.
“We think new highs just a matter of days. Now, we expect the broader markets to outperform. Markets usually run ahead of macros and price future growth,” Sanjiv Bhasin, Director, IIFL Securities said.
“There are three positive indicators for growth – reduction in the corporate tax rate, proposed divestment of large public sector units, and a possible resolution of the US-China trade impasse. Therefore, we see growth coming back in 2020,” he said.
India GDP growth was dipped to 5 percent for Q1, could go even lower for the September quarter, fear experts as both investment demand and consumption demand are low amid sluggish economic activity.
Well, the worst may now be over in terms of economy, and we could possibly see another quarter or two of poor economic data which would give long term investors another chance to possibly enter markets on dips.
“While the worst in terms of domestic macros may be over, we cannot rule out the possibility of the markets testing lower levels again while it retains the potential to move up. Earnings also may take at least one or two quarters to recover,” Dr Joseph Thomas, Head of Research, Emkay Wealth Management told Moneycontrol.
“Things have improved on the liquidity front and the interest rates are lower, and RBI and the government have initiated several measures to channelize credit and liquidity to sectors which require it,” he said.
Therefore, in the act of investing one needs not give too much credence to these movements but focus on where value lies for the portfolio.
“Over longer investment horizons, that is 3-4 years, large-caps have performed better than mid-caps and small caps in terms of the returns as well as in terms of the consistency in the returns, said Thomas who thinks that for portfolio, an appropriate combination of mid-cap and large-cap may be chosen.
We have collated a list of 19 preferred mid-cap stocks from various brokerage firms which investors could look at for an investment horizon of 1 year:
In the mid-cap space, top picks from Motilal Oswal include companies like Colgate Palmolive, Ashok Leyland, Jubilant FoodWorks, Indian Hotels, Federal Bank, Aditya Birla Fashion, CG Consumer Care, and JK Cements.
Top picks from Antique Stock Broking include names like Cholamandalam Investment, Alkem Laboratories, Honeywell Automation, Gujarat Gas, Bayer CropScience, Phoenix Mill, Solar Industries, KNR Construction etc. among others.
Disclaimer: The views and investment tips expressed by investment experts 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.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
