Mid, smallcaps outperform broader mkt

Midcap and smallcap indices have outperformed the benchmark index since the market started its unabated rise in mid-March.

At a time when the Bombay Stock Exchange sensitive index or Sensex has started showing consolidation, smaller indices have gained further momentum. Market experts say amid strong liquidity and interest rates peaking out, there is a general shift from largecap stocks to the smaller ones.

For instance, since March 15, the Sensex has given a return of a little less than 8 per cent while BSE Midcap index gained 12.31 per cent and Smallcap rose over 14 per cent. For that matter, even BSE 100, BSE 200 and BSE 500 outperformed the Sensex by one per cent.

Piyush Garg, chief investment officer at ICICI Securities, said: “There is a positive momentum in the market which is pushing midcap stocks up. They were beaten down badly in the correction period and are still trading at 30-50 per cent lower from their peak levels.” He further added that the last few sessions saw the benchmark indices stagnate while smaller indices kept rising.

Normally, when investors buy into midcap space they hold them for long term which fetches smart returns, sometimes manifolds, say market observers.

“It is partly true that a shift is being seen from largecaps to midcaps. In this leg of rally with liquidity improvement there is room for further upside in the midcap space. Moreover, at this time interest rates are peaking out which tend to fuel sharp rally in the smaller indices,” says Gopal Agrawal, equity head at Mirae Assets. But whether this rally is sustainable is yet to be seen as the situation pans out, he adds.

Majority of the stocks in the midcap index have risen between 15 and 45 per cent over the last three weeks. Shares of JM Financial and Patel Engineering rose over 41 per cent while those of Sanwaria Agro and Parsvnath Developers were up close to 40 per cent. The other stocks include Blue Dart (35 per cent), Essar Shipping (34 per cent), Gitanjali Gems (33 per cent), IVRCL Infra and JSW Holding each by 32 per cent, Indiabulls Real Estate and Kirloskar Brothers (30 per cent), among others.

According to Sailav Kaji, (director) institutional equities & chief strategist at Pamakshi Financial Services, “It is a recovery of the battered down stocks which in relative terms (with the benchmark indices) rally sharper. At the time of corrections midcap stocks fall sharper, and when the situation improves the stocks recover in a big way. I believe there is further room for smaller indices to move up and then a consolidation phase could follow.”