While the BSE mid and small-cap indices are still far from their all-time highs, they have outperformed the BSE barometer Sensex in the recent rally.
The BSE mid and small-cap indices have gained 20.55% and 18.55%, respectively, between August 28 and November 3. In the same period, Sensex moved from 17,996 to its life-time high of 21,239, gaining 18.21%.
According to experts, mid-caps are seeing bottom-fishing from high net worth individuals (HNIs). “Market participants are seeing the cycle turning. Within mid-caps, PSU bank stocks are favourites,” said AK Prabhakar, an analyst.
Shares of Allahabad Bank gained more than 19% in the last three months. Among other PSU bank scrips, Andhra Bank (8.77%), Dena Bank (28.62%), UCO Bank (33.6%), Central Bank of India (3.54%), have posted smart gains during the same period. “Mid and small-caps have outperformed large caps recently as there is valuation gap in various mid-caps. Our picks are Supreme Industries, Berger Paints, Eclerx Services, Engineers India, Bajaj Finance,” said Rakesh Tarway, AVP (research), Motilal Oswal Securities. In year-to-date period, BSE mid- and small-cap indices have declined 12.68% and 18.52%.
Among other mid-cap stocks, GMR Infra (81.96%), Just Dial (77.83%), Tata Communications Ltd (74.87%) and Jaiprakash Power (73.06%), Ajanta Pharma (59.28%), Persistent Systems (55.8%) and TVS Motor Company Ltd (52.79%) have been top-performers in the last three months.
Market observers feel any further rally in mid-cap stocks would depend upon macro-economic factors. “Sectors which see economic traction are likely to outperform. QE tapering remains a major risk to the rally,” said Vinay Khattar, head (research), retail capital markets, Edelweiss.