Midcap and Smallcap stocks leading the bulls run in share market


New Delhi: Midcap and smallcap are leading the ongoing rally in the stock market. BSE Midcap and Smallcap outperformed the benchmark in the market rally on Monday and touched a new 52-week peak. A big division is clearly being seen in the market and money from rich (HNI), foreign investors, mutual funds to retail investors is increasingly pouring into midcaps and smallcaps (small and medium-sized companies). For example, in the last one year, BHEL included in Nifty Mid Cap 100 has given up to 133% returns, whereas in Nifty-50 Best Performance NTPC has given up to 45% returns. Mazagon Dock, included in the Nifty Small Cap 100, has given 380% returns in the last one year.

Not only this, in the month of August when the market was weak, midcap and smallcap remained at their all time high. A large number of retail investors are currently investing in the mid-cap and small-cap segments through mutual funds instead of directly through the stock market. In such a situation, the question arises that why this record is fast and for how long it will continue. Investor Vijay Kedia says, “During the bull run, a similar trend is seen in undervalued mid and smallcap companies. In these there is a rerating of P/E (Price to Earning Ratio). For example, those with 8-10 P/E reach 20-25 because they grow more when the economy grows.

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What do experts say

Kishor, CEO of CNI Research. P. Ostwal says, ‘Operators are active in mid and smallcap companies. Similar companies are running in the bull run which are undervalued, which have good management and quality stock. The way the government is spending capital expenditure (capex), that trend will also have to be seen. That’s why possibilities are being created fast in Bharat Electronics, BHEL, Railtel, RVNL etc.’ According to Nitin Kedia, CEO, Kedia Fincorp, a lot of institutional funds are coming into this segment. After Prime Minister Narendra Modi said that invest in government companies and capex is also increasing. In such a situation, they are expected to do well in the coming two quarters.

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what is risk

A well-known expert of the SME market, on the condition of anonymity, said that investors are seeing value for money in mid and smallcap companies. Small-cap stocks can be very volatile in the short term. “Since many of these companies do not have strong balance sheets, they are the worst hit whenever the economic environment turns hostile,” says Nirav Karkera, Head of Research, Fisdom. “Mistakes in stock selection are possible due to insufficient knowledge of a company’s corporate governance standards, credibility of its financial data, etc.,” says Gopal Kavalireddy, head of research at FYERS. Investors should avoid overexposure to this volatile category.

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