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BSE Midcap index hits new high; analysts see more upside in months ahead

The S&P BSE MidCap Index traded higher for the third straight day, rising 3.5 per cent during the period

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Deepak KorgaonkarPuneet Wadhwa Mumbai / New Delhi

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(This report has been updated)


The S&P BSE MidCap Index hit a new high of 40,701.16, gaining nearly 1 per cent in Wednesday’s intraday trade after a strong rally seen in the power, pharmaceutical, and consumer durables sectors.

The S&P BSE MidCap Index traded higher for the third straight day, rising 3.5 per cent during the period.

On Tuesday, the index breached its previous high of 40,282.49 touched on February 8. With Wednesday’s gain, the midcap index on the BSE has bounced back nearly 10 per cent from its March low.

“The selloff seen in March was par for the course. It is normal for markets to see some profit-taking as the financial year ends. I think the worst is over for small and midcaps (SMIDs), and investors can start picking selectively from these two market segments,” said Kishor Ostwal, managing director, CNI Research.
 

Steel Authority of India, The Bombay Burmah Trading Corporation, Tata Communications, Gujarat Mineral Development Corporation, and Shivam Autotech are some of his preferred counters in the SMID pack, where he may hold some exposure.

Besides the year-end profit-booking, the sentiment in March vis-à-vis broader markets, reports suggest, was also dented, given the Securities and Exchange Board of India’s word of caution against the froth/excessive valuation building in SMIDs.

Meanwhile, Laurus Labs, Indian Renewable Energy Development Agency (Ireda), Petronet LNG, Tata Elxsi, Whirlpool of India, JSW Energy, Tata Technologies, and Schaeffler India have rallied between 5 per cent and 8 per cent in intra-day trade on Wednesday.

Among individual stocks, Laurus Labs hit a 52-week high of Rs 448 on Wednesday, as they rallied 8 per cent on the expectation of an earnings improvement. In the October-December quarter (Q3) of 2023-24 (FY24) earning calls, the management said it anticipates a slower Q3 performance ought to rebound, resulting from both a healthy order book and strong commercial execution from the January-March quarter (Q4) of FY24 onwards.

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Shares of Ireda were also locked in the upper circuit for the second straight day, up 5 per cent at Rs 157.2 after the state-owned clean energy financier posted record loan growth for the recently concluded financial year (FY24).

In an exchange filing released after market hours on Monday, Ireda said it had recorded the highest-ever loan sanctions worth Rs 37,354 crore in FY24, while loan disbursements stood at Rs 25,089 crore. With this, the total loan book stands at Rs 59,650 crore, a record growth of 26.71 per cent.

Voltas and Whirlpool of India from the consumer durables have rallied 3 per cent and 5 per cent as the India Meteorological Department said in its report that there is a fear of severe heat in Central India in April.

Analysts at Sharekhan, too, expect the rally in the broader markets to continue for some more time. The National Stock Exchange Nifty 50 Index, they said, hit a new high recently, and the broader markets, too, were expected to follow suit.

Q4FY24 earnings for companies in these two market segments, they believe, are likely to be good, which, in turn, can propel these stocks higher for some more time.

“Typically, the rally in the broader markets lasts 16-22 months. Right now, the upmove has lasted for around 17 months. So, from the upper mark of 22 months, we still are a bit far away. The rally in the broader markets can go on for another four to six months. Global cues are also supportive. One needs to be selective as this could be the last phase of the rally in SMIDs. Historically, a fall in these two indices after the prolonged rally has been to the extent of 30-35 per cent,” said Gaurav Dua, senior vice-president, head-capital market strategy and investments at Sharekhan by BNP Paribas.

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First Published: Apr 03 2024 | 2:56 PM IST

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