Mid, smallcaps find their 2nd wind as Indian equity mkt rebounds in April

Middleweight stocks are in demand, leading the market with better returns in April's recovery

Mid and smallcap stocks returned to the spotlight as the Indian equity market recovered in April. The BSE MidCap Index rose 4 per cent during the month, while the BSE 250 SmallCap Index was up 3.9 per cent — both ahead of the BSE Sensex’s 3.7 per cent gain.

 

These stocks may continue to advance if broader market sentiment stays positive, as seen in earlier bull phases. Between December 2023 and September 2024, the BSE MidCap and BSE 250 SmallCap indices rose 34 per cent and 30.8 per cent, respectively, compared to a 16.7 per cent rise in the Sensex. 

Featured below are five stocks each from the mid and smallcap segments that stand out for their combination of revenue and earnings growth, attractive valuations, and high return on equity. The selection excludes companies in banking, financial services and insurance, asset management, and equity broking and is drawn from the BSE MidCap and BSE 250 SmallCap universes. 

 

MidCaps

  Ashok Leyland 

While medium and heavy commercial vehicle volumes were weak in FY25 due to elections last year and decline in government capex spends, brokerages expect a gradual recovery in FY26 

Investments in infrastructure, steady freight rates and diesel demand could support the sector in current down cycle

  Margins are expected to be supported by pricing discipline among larger players. For the March’25 quarter, average selling prices of vehicles are estimated to be higher on rising truck mix, operating leverage and product mix, thereby boosting margins

  Ashok Leyland’s focus on market-share gains and operating profit margin expansion should help it sustain strong earnings growth 

  BNP Paribas Research believes that pick up in CV demand and earnings estimate upgrade potential for the only pure-play CV player implies more upside potential for the stock 

  Aurobindo 

While revenues in the near term are expected to growth in double digits, gross and operating profit margins could stabilise for Aurobindo on the back of a decline in raw material prices

  The drug maker will be among the major beneficiaries of the stability in generic pricing in the US market 

  With steady capacity expansion and improving yields, the Penicillin-G facility is poised to become a key earnings driver for Aurobindo in the coming years, enhancing profitability, cost efficiency, and market leadership, says BP Equities  

  The company could deliver an 11 per cent increase in adjusted earnings per share over FY24-27 on the back of a double-digit sales growth for most ex-US formulation markets, benefit from the pen-G project and benign input costs, points out Kotak Research 

  Mazagon Dock Shipbuilders 

Mazagon Dock Shipbuilders is the only company technically qualified for the supply of six units of P75-I submarines. The order, when placed, could be over ₹50,000 crore

  Brokerages believe the public sector firm will exceed its guided 12-15 per cent profit before tax margin over the next three years given the current rate of execution, significant booking revenue, and healthy order pipeline

  Nirmal Bang Research has a ‘buy’ rating on the stock riding on the timely implementation of platforms, strong revenue visibility over three years and a growing order book

  There is a pending order of over ₹25,000 crore for the supply of three Scorpene-class submarines. After the award of these orders, the company's order book will shoot to over ₹1.1 trillion 

  Dixon Technologies India 

The country’s largest electronic manufacturing services (EMS) player is a key beneficiary of the ₹23,000 crore component production linked incentive scheme 

  Brokerages expect the EMS major to ramp up its backward integration into display assembly, camera module assembly and mechanical components

  Amid tariff wars between the US and China and other competitors such as Vietnam, Dixon will be a major gainer 

of the gradual shift to India as a base for component manufacturing 

  The company’s 50:50 joint venture with Signify (Phillips Lighting) will also help arrest the revenue decline in the LED lighting business due to heightened competitive and pricing pressures

  Given the multiple triggers as well as the Signify deal, Kotak Research has revised its earnings estimates upward and upgraded the stock to ‘add’ from ‘reduce’ 

  Oil India 

Oil India’s stock price rose over 6 per cent in April, after falling nearly 50 per cent between August 2024 and March this year

  Brokerages see further the upside in the stock from current levels driven by a rise in oil & gas production and stability in crude oil prices

  Oil India’s consolidated net profit and net sales were up 24.3 per cent and 5.4 per cent respectively in the trailing 12 months (TTM) ending December 2024

  Its net profit was, however, down 43 per cent year-on-year (Y-o-Y) in Q3FY25, due to a 53 per cent Y-o-Y decline in other income

  Analysts at Elara Capital expect at least a 25 per cent rise in Oil India's crude oil and 50 per cent growth in its natural gas output in the next three years

  The brokerage has a ‘buy’ rating on the stock with a target price of ₹608, indicating a 48 per cent upside from current price of ₹410.3 

 

SmallCaps

  Natco Pharma 

The drug marker’s weak operational performance in the December quarter due to the absence of cancer drug Revlimid sales in the US market and pricing pressures in domestic formulations could continue into Q4FY25

  While higher research and development spending dented operating profit and margin significantly in Q3, margins could remain under pressure on account of change in product mix and price erosion in the US business

  Looking ahead, the planned Revlimid launch in CY25, key first-to-file opportunities, and the launch of the anti-diabetic drug Semaglutide in India by March 2026 are expected to drive recovery. Expansion in Brazil, Canada, and strategic acquisitions remain focus areas, says Indsec Securities 

  Deepak Fertilisers & Petrochemicals 

Pune-based chemicals producer Deepak Fertilisers & Chemicals is up 17 per cent in April and the stock has out-performed the 

benchmark indices in the past 12 months

  The out-performance on the bourses has was driven by the company’s strong revenue and earnings growth in recent quarters

  The firm’s consolidated revenue and net profit was up 39.2 per cent and 335.6 per cent Y-o-Y in Q3FY25

  The revenue and net profit is up 3.3 per cent and 80.5 per cent Y-o-Y in TTM ending December 2024 

  The stock remains reasonably valued with a trailing price to earnings (P/E) multiple of 19x and price to book value (P/BV) of 2.9x, significantly lower than BSE Sensex’s current valuation 

 

Godfrey Phillips India 

Tobacco products maker, Godfrey Phillips has been one of the top performing smallcap stocks recently

  The company’s stock price is up 20 per cent in the last one-month and 140 per cent in the past 12 months

  The share price rally has been driven by strong revenue and earnings growth reported by the company in recent months

  In the TTM ending December 2024, Godfrey Phillips’ net sales were up 26.4 per cent Y-o-Y, while net profit was up 23.4 per cent Y-o-Y

  Earnings momentum is expected to continue as the company gains market share driven by strong traction in the Marlboro and Stellar Shift brands, according to HDFC Securities 

  The stock is currently trading at trailing P/E of 40x and P/BV of around 9x, lower than other leading FMCG companies 

  Chambal Fertilisers and Chemicals 

There has been a sharp rally in Chambal Fertilisers & Chemicals in the last three months and the company's share price is up nearly 50 per cent since the end of January

  The share price is up 63 per cent in one-year, making it one of the top-performing smallcaps

  The rally has been driven by a recovery in growth in its fertiliser business and incremental growth from investment in Technical Ammonium Nitrate plant and phosphoric acid expansion by its Moroccan joint venture

  The company's net sales were up 13.1 per cent Y-o-Y in Q3FY25, ahead of the Street’s expectation. Its net profit was up 16.3 per cent Y-o-Y in the quarter, though lower-than-anticipated due to subdued profitability on traded fertilisers

  The stock is currently trading at a TTM P/E of 16.8x and P/BV of 3.3x, lower than Sensex’s current valuation 

  Techno Electric & Engineering 

Power sector engineering, procurement and construction (EPC) services provider Techno Electric is up nearly 7 per cent during the month of April and 12 per cent in the past year

  There was a sharp sell-off in the stock during Jan to Mar 2025 due to growth concerns and its high valuation

  Brokerages, however, remain upbeat on the company given consistent growth in its power transmission & distribution segment and expected revenue pickup from the data centre business

  The company’s net sales and net profit were up 37.6 per cent and 45.3 per cent respectively in the TTM ending December 2024

  The company’s order book stood at ₹9,700 crore at the end of December 2024, up 78.3 per cent Y-o-Y, and is equivalent to 4.7 times its EPC revenues

  JM Financial has a ‘buy’ rating on the stock with a 12-month price target of ₹1,440, indicating 35 per cent upside potential from current level of ₹1,063.10