 "Stocks surge 2.5% as global rout eases")
Midcap stocks continue to remain on buyers' radar with BSE Midcap index ending 0.1% higher as against a 0.2% fall in Sensex.
Among notable midcap stocks, Anil Ambani group shares witnessed a strong rally with Reliance Power, Reliance Infrastructure, Reliance Communication and Reliance Capital gaining between 0.5%-3.5%.
Reliance Capital recently announced the completion of an additional 23% stake sale in Reliance Life Insurance (RLI) to Nippon Life Insurance (NLI) for Rs 2,265 crore. NLI now holds 49% stake in RLI. Following the stake sale, RLI will be renamed Reliance Nippon Life Insurance Company.
Select public sector undertaking (PSU) banks extended yesterday’s gain on the bourses after media report indicated that the Reserve Bank of India (RBI) had trimmed the list of debt-laden companies for loan provisioning in the fourth quarter ended March 31, 2016.
ALSO READ: Nifty PSU Bank index hits three-month high
Likewise, shares of Glenmark were up around 4% after the company announced that it had addressed concerns raised by the US Food and Drug Administration (FDA) in February, following the latter’s inspection of its manufacturing unit at Pithampur, in the Dhar district of Madhya Pradesh.
Other major gainers included National Aluminium (NALCO), Indian Hotels, Exide Industries, M&M Finance, Cadila Healthcare and Biocon, all surging between 1.5%-3.2%.
OUTLOOK & STRATEGY
BSE Midcap index has clocked a gain of 15% after Union Budget 2016, and has managed to outperform the Sensex which rallied 12% during the same period.
Experts' take on how midcaps are going to perform as against the Sensex:
Sachin Shah, Fund Manager, Emkay Investment Managers: Mid- and small-caps are largely a bottoms-up approach. Therefore, it completely depends on the individual stocks that one invests, and it would therefore not be a very fair comparison to be done of the overall mid and small-cap space with the large-cap indices. Some of the spaces that we have identified as niches to be invested for mid-small-caps stocks are defence, railways, water treatment and travel and tourism. My top picks from this segment are LIC Housing, SKS Microfinance, Sundram Fasteners, Guj Pipavav Port and Power Grid.
Ravi Shenoy, VP-Midcaps Research, Motilal Oswal Research: We believe strongly in bottom-up stock picking and believe that mid and small caps could continue to outperform large-caps. We expect midcaps to have a stock specific move in 2016 after a generic midcap rally in 2015. We advise investors to be selective and stick to companies with growth and strong return ratios. Q4 earnings will be a litmus test for companies, more so for companies in the midcap and smallcap space. Repco Home, TVS Motors, Eveready, Finolex Cables and PI Industries are five companies we have recommended to our clients.
Siddhartha Khemka, Head – Equity Research (Wealth), Centrum Broking: The midcap space should continue to do well but one has to be careful when picking stocks. Financials, valuations, business model, quality of management have to be taken into consideration when picking a midcap company. Some of our picks in the mid cap space include stocks like Siyaram Silk Mills, Sanghvi Movers, KRBL, Bajaj Corp.
“Niche NBFC, road construction, Power T&D – EPC, consumption, exports, cement, speciality chemicals are some of the sectors that are likely to do well. Some of the stocks that we like among these sectors are Repco Home Finance, Sundaram Finance, Ahluwalia Contracts, J Kumar Infra, MM Forging, JK Cement, Welspun India, Techno Electric," he adds.
AK Prabhakar, head-research, IDBI Capital: The rally among the broader markets is likely to fizzle out as the earnings may not be favourable. One should be stock specific at this level and select stocks which have good growth prospective. From a long term perspective (2 years), one can look at stocks like Ramco Cement, Kokuyo Camlin, Finolex Industries (Monsoon theme), Supreme Industries, Neelkamal, Mayur Uniquoters and Arvind.
