The S&P BSE Mid-cap index hit a 52-week high of 15,677 points on Friday, surpassing its previous high of 15,662 hit in April 3 last year, on the back of strong rally in Adani, Tata Group, financials, pharmaceuticals and consumer discretionary goods & services stocks.
Adani Transmission, Adani Power and Adani Enterprises from the Adani Group, while Tata Global Beverages and Tata Chemicals from the Tata Group have rallied more than 25 per cent from their respective April 3, 2019 levels.
Besides, ICICI Securities, Reliance Nippon Life Asset Management, Berger Paints, Whirlpool of India, Indraprastha Gas (IGL), AU Small Finance and Motilal Oswal Finance have seen their market price surge more than 40 per cent during the period. Berger Paints, AU Small Finance, Divis Laboratories, IGL and Muthoot Finance from the index hit their respective all-time highs today.
Morgan Stanley expects the market to pay more attention to undervalued stocks and to the stocks of companies with rising return on capital rather than just high return on capital.
"With valuations, performance and growth all hitting troughs, small- and mid-caps are likely to recover relative to large caps and probably outperform the narrow indices, such as the BSE Sensex and Nifty. The key to their outperformance will be gaining share in profits, which seems to have started sometime over the past two quarters," it added.
Individually, ICICI Securities has zoomed 89 per cent to Rs 434 from its April 3, 2019 level of Rs 230 amid expectation of earnings improvement going forward. Antique Stock Broking has initiated coverage on ICICI Securities with ‘buy’ rating and target price of Rs 450 per share.
“Unlike most of the innovative companies, ICICI Securities isn't resting on its past laurels and has started its journey to transform from India's largest retail broker to India's largest 'Financial Supermarket' for retail investors just like Charles Schwab. This journey has the potential to not only reduce the cyclicality of business but also provide long run way for growth”, analysts said in a report dated December 19, 2019.
Meanwhile, Tata Global Beverages has soared 83 per cent since April 3 on the BSE. The stock of the tea & coffee company has surged 26 per cent in the past 9 trading days after the National Company Law Tribunal (NCLT) approved the scheme of arrangement between Tata Global Beverages and tata Chemicals.
In May last year, Tata Group had decided to demerge consumer business of Tata Chemicals and merge it with Tata Global Beverages. Tata Global Beverages will be renamed as Tata Consumer Products, the group had announced. Under the scheme, every shareholder of Tata Chemicals will get 1.14 new equity shares of Tata Global Beverages for every one equity share held in Tata Chemicals.
The management said the combination of the two consumer-focused businesses will benefit both sets of shareholders who will be able to participate in a larger business poised to grow their share of the foods & beverages market with a broader exposure to the attractive and fast growing FMCG sector. Meanwhile, benign tea, coffee prices and cost-comparator are likely to drive strong earnings growth for Tata Global Beverages.