Midcap stocks outperform Sensex, Nifty in the last one year

Suresh Sadagopan, founder, Ladder7 said, “Renewed domestic investor participation especially as all other assets including Fixed Income securities offering muted returns, FII interest in our stocks, DII buying, are some of the reasons.”

Representational Image. Photo: Pixabay

Highlights:

S&P BSE Midcap crossed 15,000-mark for the first time.

Midcap stocks have given more returns in one year compared to Sensex, Nifty

A total of 11 midcap companies have given between 90% - 126% returns.

Both Sensex and Nifty have reached a whole new level since the start of May 2017 but it was midcap stocks that have truly stolen the show.

On May 16, 2017, S&P BSE Midcap crossed 15,000-mark for the first time.

Sensex and Nifty on have touched an all time-high of 30,692 and 9,532, respectively.

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Suresh Sadagopan, founder, Ladder7 said, “Renewed domestic investor participation especially as all other assets including Fixed Income securities offering muted returns, FII interest in our stocks, DII buying, are some of the reasons.”

In a period of one-year, S&P BSE Midcap index gave over 35% return to its investors and Nifty Midcap rose 30%.

A total of 11 midcap companies have given between 90% - 126% returns in the last one year.

Jubilant Life Science and Dewan Housing Finance took the top spot by giving more than 125% returns in one year.

Other companies like Cairn India, Sun TV, DCB Bank, Piramal Enterprises, MRF, MRPL and Century Textiles too have been riding between 100% - 122% returns.

L&T Finance Holdings and Biocon in the same period has given returns of 97.46% and 90.84% respectively.

Since the start of the year 2017, S&P BSE Midcap stocks are on a booming stage. From January 2017 – till date, this index have given over 20% returns.

Motilal Oswal in its recent report cited four reasons for such out-performance.

Firstly, mid-cap stocks are less driven by commodities and cyclical businesses compared to large caps. Secondly, the big benefit has also been an outcome of cheap oil prices.

Motilal Oswal's report said most of the large companies are dependent on the prices of commodities and oil which is why a weak commodity price has actually worked against them.

Also, midcaps have much lower debt levels compared to larger corporate.

As per Motilal Oswal, IT and pharma companies have also played their part in this mid-caps outperformance. Currently, both the sectors faces pressure from H1-B visa regulations and Form 483 investigations and stringent compliance requirement.

Vinod Nair, Head Of Research, Geojit Financial Services said, “ "In the end the strength of the market will depend on the Q4 result which has started on a weak note and the implication of GST to the economy."

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