INSUBCONTINENT EXCLUSIVE:
Mumbai: Samvat 2076 may be a year of the midcap and smallcaps, as value has started emerging after this pack underperformed for two
consecutive Samvats in 2075 and 2074, say analysts.
However, identifying the right stocks in this space would be the key.
In Samvat 2075,
while the 30-share BSE Sensex rose 11 per cent, BSE Midcap index dropped 2.1 per cent and the Smallcap index 9 per cent.
In Samvat 2074,
Sensex climbed 8 per cent, while BSE Midcap index fell 8.4 per cent and the Smallcap index 15.6 per cent value.
The value erosion was more
pronounced in stocks which high leverage and later faced liquidity crisis.
Gaurav Dua, Senior Vice-President and Head of capital market
strategy - investments at Sharekhan by BNP Paribas, expects the situation to improve for midcap and smallcap companies after the severe
corporate tax in financial year 2019
Post corporate tax cut, investor interest in midcaps and smallcaps should revive gradually, as earnings could improve with immediate effect
midcap stocks have deleveraged their balance sheets and the recent tax cut could enhance their return of equity (RoE)
houses that participated in the ETMarkets.com Samvat Survey, said they expect midcaps and smallcaps to rebound and outperform their larger
peers in the year ahead.
However, quality and stock picking would be key from the investor point of view, and one cannot paint all the
A bottoms-up approach based on company fundamentals should be the only criteria
Securities.
Ajit Mishra, Vice-President for Research at Religare Broking, says the recovery in midcaps and smallcaps may not be as
components of BSE midcap index shed value, while 552 of 712 components of BSE smallcap index eroded market capitalisation, clearly
suggesting that the extent of meltdown was more pronounced in smaller stocks.
In the same period, 12 of 20 Sensex stocks declined.
Among
midcap stocks, Indiabulls Ventures fell the most among midcaps with a 78 per cent value erosion, while Cox - Kings was the biggest value
destructor among smallcap stocks, with a value erosion of 99 per cent.
Fourteen smallcap stocks eroded more than 90 per cent value
They included Talwalkars Healthclubs, Mercator, McLeod Russel India, Reliance Communications, Reliance Capital, Reliance Infrastructure,
Reliance Home Finance, Reliance Power, Sintex Plastics Technology, Ballarpur Industries, Sintex Industries , Dewan Housing Finance
Corporation and Housing Development - Infrastructure
