Nearly 40 Small And Midcap Stock Ideas To Create Wealth In The Long Term

Now that the benchmark indices of the Indian markets have hit new record highs, analysts are expecting the upside to shift to broader markets.

The two large-cap indices- BSE's Sensex and NSE's Nifty 50- touched their record highs of 44,730.79 and 13,128.40, respectively, on Tuesday but traded flat on Wednesday.

On the other hand, Nifty Smallcap 100 and Nifty Midcap 100 both hit their new 52-week highs on Wednesday at 6,665.60 and 20,026.65, respectively.

After 2 years of underperformance, small and midcaps are gaining attention this year. The stocks are looking especially attractive at after the official Q2 GDP (gross domestic product) showed 7.5% contraction, signalling a pick up in economic activity compared to With economic recovery looking better than expected, companies in this segment are poised to benefit. Attractive valuations have also played a role in their outperformance as investors are seeing it as an opportunity to bet on quality names.

November's rally in large caps was mainly driven by the record inflows of over Rs 60,000 crore from Foreign Portfolio Investors (FIIs). The argument now is that it is likely that domestic investors will book profits on their large-cap stocks to purchase better valued small and midcaps.

Talking about the bull run in benchmark indices, Nirmal Jain, Chairman & CEO, IIFL Finance told ET in an interview that while some corrections are likely, "this scenario will continue for quite some time." He further added that money might now flow to the midcap and small caps and the rally would broaden as the DIIs (Domestic Institutional Investors) who are selling out in the large caps where FPIs are buying, could divert that money to midcaps and small caps where there is "great value."

In the coming quarters, with lower interest rates on loans and higher possibility of GDP growth turning positive, these companies are expected to report better earnings.

"The small and midcaps are picking up steam and they should deliver solid returns in 2021 as economic uncertainties will reduce and volatility will decline. We believe volatility will decline significantly in 2021 which will lead to a small and mid-cap rally," said Neeraj Chadawar, Head- Quantitative Equity Research, Axis Securities to Moneycontrol.

"From a valuation perspective, the mid-caps look attractive vs. large caps. Our case for two year rolling returns indicates that the market has turned in favour of small and mid-cap stocks which are more reasonably valued and offer greater upside potential," he added.

Here are some midcap picks from Motilal Oswal Financial Services Limited:

1. Motherson Sumi
2. Ipca Labs
3. AU Small Finance
4. Mphasis
5. CG Consumer Electricals
6. Emami
7. LIC Housing Finance
8. ICICI Securities
9. Aditya Birla Fashion
10. India Energy

ICICI Direct has picked small and midcaps that it has called "bargain picks".

BFSI

• M&M Finance
• City Union Bank
• Sundaram Finance

Tech

• Persistent
• Cyient
• Matrimony
• Teamlease

Consumption

• Hindustan Unilever
• Pidilite
• Bata
• VGuard

Auto

• Asahi India
• Tata Motors
• Philips Carbon

Capital goods

• Thermax
• BEL

Infra and Realty

• Oberoi Realty
• JK Lakshmi
• PNC Infra

Pharma

• Sun Pharma
• Lupin
• Natco Pharma

Agro & Chemicals

• Aarti Industries
• Rallis
• Sudarshan Chemicals

Others

• Bharti Airtel
• JSL
• Concor

Disclaimer

The article is purely informational and is not a solicitation to buy, sell in securities mentioned in the article. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article.