Moneycontrol
Last Updated : May 25, 2018 03:12 PM IST | Source: Moneycontrol.com

These 38 multibaggers stocks rose up to 600% in 4 years; do you own any?

Since 2014, midcaps have faced three large round of corrections in January 2016, November 2016 and May 2017. In the current round, midcaps have already retraced 14 percent from the top, puncturing the bull cycle.

Kshitij Anand @kshanand

Midcap stocks surged in 2014 after Prime Minister Narendra Modi assumed office on hopes of pro-growth reforms and a strong bounceback in economic growth.

As many as 38 companies have returned 100-600 percent in the last four years. These include: Dalmia Bharat, IIFL Holdings, Natco Pharma, NBCC, TVS Motor Company, Page Industries, Biocon, Ashok Leyland, Rajesh Exports, and 3M India.

But if you joined the rally late, there are chances that your portfolio might still be bleeding. The BSE Midcap index, which nearly doubled since 2014, came under pressure in the last five-months, weighed down by falling rupee versus the dollar, sharp selling by foreign institutional investors (FIIs) and market regulator Sebi’s reclassification of mutual fund schemes.

In October last year, the regulator issued a circular directing mutual funds to group their equity schemes under large, mid and smallcap categories based on the market capitalisation of stocks the scheme have invested in.

Sebi’s reclassification is aimed at simplifying the life of a mutual fund investor by rationalising the number of schemes available in the market and also re-categorising the same. The will enable the investor to differentiate between schemes as per his/her goals and risk appetite, with relative ease and without much confusion.

“The reason why Sebi reclassification is leading to a sell-off in midcaps and smallcaps is because many largecap funds had a proportionately greater exposure to these with the aim of outperforming the benchmark index: Nifty/Sensex,” Jayant Manglik, President, Religare Broking, told Moneycontrol.

Image52552018

38multibaggersimage

If we look at the losers, there are stocks that have lost up to 90 percent of their value in the last four years. As many as 21 stocks in the BSE Midcap index posted negative returns since the Modi government came to power in 2014. These include: Reliance Communications (down 90 percent), Bank of India (down 70 percent), Adani Power (down 65 percent) and Reliance Power (down 65 percent).

What should investors do with these midcaps?

Since 2014, midcaps have faced three large round of corrections in January 2016, November 2016 and May 2017. In the current round, midcaps have already retraced 14 percent from the top, puncturing the bull cycle.

Despite India’s macro story taking a hit due to falling rupee against the dollar and higher crude oil prices there is a higher likelihood of bottom-fishing happening in the short-term. Hence, experts advise investors to be cautious while picking stocks.

“It is imperative that an investor re-assesses the portfolio at periodic intervals to weed out stocks which do not fit various fundamental criteria. While a considerable premium valuation may warrant at least a partial profit-booking in the stock, the mere fact that it has been a multi-bagger is not the most appropriate argument to exit a stock,” explains Manglik.

Investors concerned about rich valuations can focus on companies in the largecap domain or stocks that turned largecap, experts said.

“Midcaps are still trading at premium valuations as compared to largecaps. If investors are not ready to hold the stock for 3-4 years, then they should exit from the winners which have given multi-bagger returns,” Foram Parekh, Fundamental Analyst – Equity, Indiabulls Ventures, said.

She lists Tata Consultancy Services (TCS), Yes Bank, Bajaj Finance and Bajaj Finserve as some of the stocks which have grown from midcaps to largecaps over a period of time. “These stocks continue to perform and have delivered multibagger returns to clients.”

From the above table, she recommends quality stocks like Jubilant FoodWorks, Westlife Development, Parag Milk, Gujarat Narmada Valley Fertilisers & Chemicals and Dewan Housing Finance Corporation which have not corrected despite the broader index correction.

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.
First Published on May 25, 2018 11:04 am
Loading...
Sections
Follow us on
Available On
PCI DSS Compliant