Nifty Midcap 100 index today rose as much as 0.75% to 21,064 intraday, hitting the 21,000 level for first time since January 2018. However, profit-taking dragged the midcap index lower and it settled 0.27% lower at 20,849.
“Mid-cap has always been an interesting space for investors. This segment has known to be generating lucrative returns in the past. However, this segment could not sustain the onslaught of COVID and was severely hit. But with recovering economy and stimulus packages, this segment has seen recovery and with the recent inflow of liquidity in the markets, it could come back to its previous levels,” says Ashis Biswas Head of Technical Research CapitalVia Global Research.
“It seems that with current trends in the market, Nifty midcap may go up to the levels of 21900-22000 with a possible correction up to 19500 (if any). 2021 can prove to be a good year for mid-cap space,” he added.
The Nifty Midcap 100 index has risen over 20% year to date, outperforming Nifty’s 13% gain.
“We expect further recovery in quarterly earnings after the recent slowdown. We have already observed the consumption cycle to revive, and the recovery will continue. It may take a longer time than anticipated to restore the damage fully by a mid- to small caps company, but selected stocks are attractive from a valuation point of view,” he said.
Some analysts are turning cautious on broader markets for the short term after the recent rally.
“Market is rallying on the affirmation of the US FOMC policy decision to keep rates unchanged and assurance of continued support through further stimulus until the economy reaches the employment and inflation target. Along with this, the market is inching higher on expectations of upcoming events like further stimulus packages, Brexit progress and vaccine developments. Post the recent rally, mid and small caps in India are marginally slowing down, it failed today to participate in the rally with the flattish trend, adding caution ahead forthcoming developments,” said Vinod Nair, Head of Research at Geojit Financial Services.
In a October report, Morgan Stanley’s Ridham Desai and Sheela Rathi said that the broader market in India looks very attractive vs the narrow market (Nifty and BSE Sensex) and, hence, “we like mid-caps.”
“We like a barbell portfolio with a mix of quality at a reasonable prices and cyclicals,” they said.
Morgan Stanley is overweight on consumer discretionary, industrials and energy, and underweight technology and consumer staples.
Axis Securities remains bullish on Indian markets, with a December 2021 target of 14,600.
“Growth combined with value is a win-win proposition even as the Indian equity markets have reached an interesting point the market offers multiple plays. Value plays like Metals, Banks, NBFCs and others have started delivering solid returns but also the small and midcap space marked by discretionary consumption, retail, autos and others have delivered returns. Thus, the market is rewarding handsomely across both the themes. Hence, combination of the two themes continues to deliver the most rewarding returns,” the brokerage said.
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