Broader markets have outperformed benchmark indices in the last 1 month. The Nifty Midcap and Nifty Smallcap indices have gained 6 percent and 4 percent, respectively in this period, in comparison with a half a percent fall in the benchmark Nifty in the last 1 month.
The rise in the midcaps and small caps comes after the recent correction due to the worsening geopolitical tensions between Russia and Ukraine and the resulting inflationary concerns which provided a good opportunity for investors to accumulate good quality midcap and smallcap stocks at cheaper valuations.
In the Nifty Midcap 100 index, 6 stocks gave double-digit returns in the last 1 month, while 28 gave positive returns in the last 1 month. The remaining 22 stocks were in the red in this period.
Meanwhile, in the Nifty Smallcap 100 index, 4 stocks rallied over 20 percent in the past 1 month while only around 30 stocks were in the green in this period lifting the index. The remaining stocks gave negative returns.
However, it is important to note that while midcaps may offer higher returns, it also comes with a higher risk as compared to largecap stocks. Only investors with a high-risk appetite should consider investing heavily in midcap stocks while those with a conservative risk appetite should prefer to stay away.
Among stocks, Swan Energy from the smallcap index rose the most, up over 60 percent in the last 1 month followed by Godfrey Phillip, which was up nearly 30 percent. In the last 1 year, the textile manufacturing firm Swan Energy has doubled investor wealth rising 115 percent.
Meanwhile, BEML, Aegis Logistics, EID Parry, PTC India, DCB Bank, VRL Logistics and Schneider Electric Infrastructure added over 15 percent each.
In the midcap index, Adani Total Gas gained the most, up 41 percent. In the last 1 year, this Adani firm has rallied 120 percent. Among other midcap stocks, Torrent Power, Tata Communications, Hind Zinc, Dalmia Bharat and Indiamart Intermesh rose over 10 percent each.
Going ahead, Vinit Bolinjkar, Head of Research, Ventura Securities believes the volatility is here to stay in the short run given nervousness around FED tapering, after-effects of Russia Ukraine war, etc. Directionally, he believes, the trend will remain negative from hereon.
While the midcaps and smallcap have outperformed, Bolinjkar still prefers betting on largecap stocks in the current environment. He said that generally in a rising interest rate cycle, large caps outperform mid and small-cap stocks. We believe that the same trend should continue even this time.
Going ahead, most analysts expect the volatility to continue in the near term and suggests largecap stocks for risk-averse investors. However, investors with a higher risk appetite can 'buy on dips' quality midcaps with robust fundamentals. One must contact their financial advisor before taking buying or selling any stock.
Axis Securities believes that midcap stocks provide attractive investment opportunities in the broader market at current levels. It added that the long-term story for the equity market remains intact.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.