The latest bull run began on September 20, 2019, after the government decided to cut the corporate tax rate to spur the economy. Since then, the BSE Sensex has rallied 16 percent and the Nifty50 surged 15 percent to hit fresh record highs.
However, the rally was limited only to a few select frontliners till December. Now, favourable global cues have tilted the overall breadth of the market in favour of bulls and investors have started pumping money into the broader markets.
The Nifty Midcap 100 index jumped more than 17 percent and Smallcap index gained nearly 16 percent after sharp underperformance since February 2018 due to economic slowdown, NBFC crisis and muted earnings.
Most experts (global as well as domestic) expect the broader markets to outperform largecaps in the years ahead, especially after government measures which are long term benefits for corporates.
Hence, Prabhudas Lilladher said multibaggers of the past from the mid, small & microcap universe that have corrected significantly from their 10 year-high and are now bouncing back with strong fundamentals intact.
The brokerage has listed out 30 ex-multibaggers by using 12 points methodology, which had given the return in the range of 6-162 times in 10-year period since December 2009.
Ajanta Pharma was the biggest multibagger amongst them, giving 162 times return in those 10 years, followed by La Opala RG (136.9 times), Can Fin Homes (42.5 times), Excel Industries (49.9 times), Natco Pharma (49.1 times), Balkrishna Industries (35.5 times) etc.
Methodologies used by the brokerage are market cap, listing tenure, peak returns, current correction (companies trading at least 35 percent below their all-time high price achieved in last five years), latest quarterly YoY EBITDA de-growth, current cash from operations, current shares pledge, promoter holdings etc.
In terms of market cap, it said it considered micro, small and midcap companies trading at attractive valuations relative to their largecap peers, post the flight to safety-driven largecap rally.
As per its methodology, companies with pledge higher than 20 percent put equity shareholders at risk of dumping by lenders in case of non-repayment of borrowings by promoter and hence must be avoided.
Under its interest coverage methodology, it said it avoided companies that have chance of coming under severe financial stress, in situations where business earnings cannot comfortably cover repayment obligations. Interest Coverage is calculated using EBIT/Interest and NOT EBITDA/Interest, hence a more conservative approach.
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