The rise in the midcaps comes on the back of the recent correction amid 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 stocks at cheaper valuations.
In the Nifty Midcap 100 index, 3 stocks more than doubled investor returns in the last 1 year while 8 surged over 50 percent in this period. 18 stocks gave double-digit returns while only 15 stocks were in the red in the last 1 year.
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.
JSW Energy was the best performing midcap, up 226 percent in the last 1 year. It has been on a roll due to a pick-up in economic activity and the accompanying rise in power consumption. The company's Q3 numbers also got a boost by the rise in power tariff.
Following JSW Energy, Mindtree also surged 111 percent in the last 1 year on the back of robust growth potential. Its net profit for the third quarter ended December also rose 34 percent year-on-year to ₹437.5 crore, driven by growth in revenues and various operational efficiency parameters and increased utilisation. Its revenue was also up 36 percent YoY to ₹2,750 crore in Q3FY22.
Adani Total Gas was the third stock that more than doubled investor wealth in the last 1 year. The stock rose 105 percent in the last 1 year. However, in the last 3 years, it has skyrocketed around 1,600 percent.
Adani Total Gas is one of India's leading private players in developing City Gas Distribution (CGD) networks to supply Piped Natural Gas (PNG) to Industrial, Commercial, Domestic (residential) customers and Compressed Natural Gas (CNG) to the transport sector. The company's consolidated net profit slipped 9.3 percent to ₹131.58 crore despite a 78 percent jump in net sales to ₹883.27 crore in Q3 FY22 over Q3 FY21.
Going ahead, most analysts expect the volatility to continue in the near term and suggests largecap stocks for risk-averse investors. However, investors with higher risk appetite 'buy on dips' quality midcaps with robust fundamentals. One must contact their financial advisor before taking buying or selling any stock.
Axis Securities also believe 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.