At a time when the return in the frontline indices have been nothing to write home about in calendar year 2020, the action has shifted to the mid-and small-cap stocks. While the S&P BSE Sensex has lost nearly 6 per cent YTD till August 25, the S&P BSE Midcap and the S&P BSE Smallcap indices have gained around 1 per cent and 9 per cent, respectively during this period.
The rise in select counters, however, has been spectacular. A quick analysis of the stocks that comprise the S&P BSE 500 index reveals 13 stocks that have rallied 100 per cent to 225 per cent thus far in calendar year 2020 with GMM Pfaudler, Laurus Labs
and Adani Green topping the charts with a return exceeding 200 per cent during this period, ACE Equity data show.
All the above three, however, have been news-driven. GMM Pfaudler, for instance, has found investor interest especially after the company unveiled plans of acquiring
a 54 per cent stake in its parent firm, Pfaudler Group, for $27.4 million. GMM, which supplies process equipment to pharmaceutical and chemical industries, has signed definitive agreements to acquire a majority stake in Pfaudler Group from the private equity firm Deutsche Beteiligungs AG Fund VI (DBAG) for the stake.
Laurus labs, too, continued its journey north after the company posted a stellar set of numbers for the quarter ended June 2020. For the period under review, Laurus Labs posted consolidated revenue of Rs 974 crore, up 77 per cent year-on-year
(YoY), while earnings before interest, taxes, depreciation, and amortisation (EBITDA) came in at Rs 285 crore, up 288 per cent YoY. Net profit / profit after tax (PAT) zoomed 1,047 per cent YoY to Rs 172 crore.
Going ahead, most analysts expect the mid-and small-cap segments to continue doing well as compared to their large-cap peers, which they feel are now fairly valued.
"Post the March 23, 2020 bottom, the market rally has pulled the Long Term Growth Value (LTGV) to 54%, which is close to the long-term average (52%). This, in our view, signifies that the market is fairly valued at the current levels. Compared to largecaps, midcaps look more attractive with LTGV of 45% versus 54% for Nifty," wrote Pradeep Kumar Kesavan, Ravi Muthukrishnan and Anushka Chhajed of Elara Capital in an August 25 note.
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On technical parameters, too, the mid-and the small-cap segment looks attractive, analysts say.
"The formation of higher peak and trough is supported by significant improvement in market breadth. Currently, around 70 per cent constituents of the Nifty midcap, Smallcap indices are sustaining above their long-term 200 days simple moving average (SMA) compared to past two week's reading of 58%. This signifies broadening of participation and augurs well for durability of ongoing up move," wrote analysts at ICICI Securities in an August 25 note.