After underperforming the benchmark indices for the last two years, the Nifty Midcap hit a seven-month high last week. The Nifty Smallcap index, too, has recovered, gaining over 10 per cent over the past month after ending CY2019 in the red. Prior to the recent rally, valuation discount of mid-caps as compared to the large-caps stood at decadal highs. This is expected to change on improved risk reward amid low expectations. Further with global liquidity conditions and strong fund flows supportive of the market and a gradual economic revival expected this year, stocks in small- and mid-cap space are expected to do well. Analysts at Edelweiss Research expect mid-caps to outperform their large peers on easing aversion to risk. However, they advise investors to be selective with a focus on stocks which are available at reasonable valuations.
Here is a list of 10 stocks compiled from brokerage recommendations which could outperform over the next year on the basis revenue outlook, profit growth, reasonable leverage and attractive valuations. Stocks in the list meet the criteria of at least 15 per cent growth in earnings as well as returns over the next year.