“We saw stellar moves in many pockets, especially the midcap index, which had given early signs of completing its time-wise as well as price-wise correction phase,” he said by email. “The party seems to have begun for mid-caps.”
Smaller companies, stars of India’s market in 2017, bore the brunt of the sell-off that roiled India and other emerging nations last year. The Nifty midcap gauge closed 2018 with a loss of 15 percent, versus a 3.2 percent gain for the Nifty Index, as investors sought the safety of the biggest stocks amid headwinds from the trade conflict and rising oil prices. The mid-cap gauge remains modestly down for 2019, while the benchmark is at a new high.
A potential victory for Modi’s Bharatiya Janata Party-led alliance will also help bring back domestic fund flows, and that’s good news
for mid-cap stocks, said Mahesh Nandurkar and Abhinav Sinha, analysts at CLSA India Pvt.
Flows into local equity mutual funds in April were the smallest in 31 months as the anxiety about the outcome of the marathon election prompted investors to hold off on fresh purchases. Still, funds that invest in mid- and small-caps contributed to a bulk of the month’s inflow, the Association of Mutual Funds in India said earlier this month.
CLSA’s mid-cap picks include developers Godrej Properties Ltd. and Sobha Ltd., Lemon Tree Hotels Ltd., Aditya Birla Fashions Ltd. and Dr. Lal PathLabs, a diagnostic company.