 "Wealthy investors nibble at mid-caps, analysts cautious")
Well-heeled investors have been nibbling at shares of select mid-cap companies of late, encouraged by a perception that the worst is over for the economy and by cheaper valuations. Expectations that the US Federal Reserve would defer withdrawal of its monetary stimulus have also fuelled sentiment.
However, market participants warn that the gains could be short-lived, as the earnings outlook for many of these companies is still hazy.
About 55 per cent of the 223 stocks on the BSE exchange’s mid-cap index have outperformed the benchmark Sensex in October so far; 42 per cent did better. The Sensex during the period rose 7.7 per cent, while the BSE mid-cap index has risen by a little over five per cent.
Analysts said the mid-cap index could have underperformed the Sensex despite 55 per cent of its stocks outperforming because stocks with higher weightage would have remained subdued. “In the past two weeks or so, a lot of smart HNI (high net worth investor) money has found its way into the mid-cap segment,” said Amish Munshi, senior fund manager and head of research — equities, Tata Asset Management.
However, market participants warn that the gains could be short-lived, as the earnings outlook for many of these companies is still hazy.
About 55 per cent of the 223 stocks on the BSE exchange’s mid-cap index have outperformed the benchmark Sensex in October so far; 42 per cent did better. The Sensex during the period rose 7.7 per cent, while the BSE mid-cap index has risen by a little over five per cent.
Analysts said the mid-cap index could have underperformed the Sensex despite 55 per cent of its stocks outperforming because stocks with higher weightage would have remained subdued. “In the past two weeks or so, a lot of smart HNI (high net worth investor) money has found its way into the mid-cap segment,” said Amish Munshi, senior fund manager and head of research — equities, Tata Asset Management.
Nirmal Rungta, director and head-private client group, CIMB Securities, said the buying across sectors was buoyed by the good earnings figures posted by large-cap and some small-cap companies. “For the buying interest in mid-cap stocks to sustain, it requires a lot of steady market movement. If the market continues to hold at these levels, we could possibly see a further rise in select mid-cap stocks of the banking, information technology and pharma space,” said Dilip Bhat, joint managing director, Prabhudas Lilladher.
Some in the market believe the optimism over the mid-cap theme is being stretched. “The market has become very complacent about the positive momentum in the past few trading sessions. The main reason for this has been the delay in the tapering of the (US Fed’s) QE3, which has assured the market of continued liquidity,” said Mehraboon Irani, principal and head-PCG, Nirmal Bang Securities.
Observers said the near-term concerns include the remainder of the September quarter earnings numbers, some of which could negatively surprise markets, and the Reserve Bank’s likely decision on repo rates. “Investors would not hesitate to book profits at these levels,” said Munshi.