Money has been moving from MID CAPS to LARGE CAPS .....
http://www.moneycontrol.com/news/bu...0-from-record-highs-hit-in-april-2292085.html
May 30, 2017 09:35 AM IST | Source: Moneycontrol.com
More than 100 stocks have slipped up to 30% from record highs hit in April
The recent trend suggests that small and midcap stocks could face some profit booking.
Kshitij Anand
Moneycontrol News
The S&P BSE Midcap index rose 1.2 percent, while the S&P BSE Sensex rallied 4 percent or nearly 1,200 points from April, but more than 100 stocks have slipped from their record highs with cuts as deep as 30 percent.
The recent trend seen in markets suggests that small and midcap stocks, which rallied ahead of expectations, could face some profit booking and this theory has already started to reflect in prices.
Almost 60 stocks saw double-digit cut after hitting record highs in the month of April despite strong momentum seen in benchmark indices which rose to a fresh lifetime high of 31,214.39 on the S&P BSE Sensex and 9,637.75 on the Nifty.
Stocks which have plunged from record highs include names like Delta Corp (down 32 percent), Jubilant Lifesciences (down 22 percent), Biocon (20 percent), SpiceJet (19 percent), Future Retail (down 18 percent), V-Guard (18 percent), and Max Financial (17 percent) etc. among others.
The equity market has rallied in recent trading session recording their lifetime highs for both Nifty & Sensex. Similarly, a midcap index surged by nearly 30 percent so far in the year 2017.
The rally seems to remain unbroken with impartial correction seen at a certain interval, but the investor should remain cautious as the trend will halt anytime soon. Analysts advise caution at current levels and suggest partial profit booking in midcap space.
The valuations of some midcap stocks have already run-up ahead of fundamentals and if investors are planning to buy stocks on declines they should choose bottom up stories which have stable growth model and stable cash flows.
The NSE Midcap index which more than doubled in the last three years has outperformed Nifty by a whopping 50 percent in the last five years, Kashyap Pujara, ED & Deputy Head of Research, Axis Capital said in an interview with CNBC-TV18.
“Midcap stocks have outperformed benchmark indices amid the muted earnings growth. Hence, for investors, the best practice would be to look at bottom-up stories,” he said.
Pujara further added that investors should invest in stocks where they are sure that there is a possibility of earnings growth and expectation of Vs earnings growth are realistic in terms of current multiple which the stock is trading at.
Largecaps looking attractive
After a sharp rise in midcap valuations, analysts are more confident about the largecap story going forward which are likely to gain traction on the implementation of goods & services tax as well as global liquidity.
The immediate strategy for an investor with larger allocation towards midcap stock will be to book-profit at mid resistance-level and build a corpus to buy during any major dip in price.
As the economy is on the cusp of turnaround coupled with earnings growth likely to recover and implementation of reforms at the regime, the market valuations will tune towards its fair value in coming period, suggest experts.
“This strategy should be approached for those stocks with consistent growth record and strong fundamental outlook,” Dinesh Rohira, Founder & CEO, 5nance.com told Moneycontrol.
“A strategy to exit from midcap to large cap stock should be for those stock with a negative outlook in terms of growth or fundamental or to route his investment through a mutual fund with the mid-cap theme to diversify the portfolio. It will be important for an investor to ascertain the proper allocation in his portfolio given the valuation concern,” he said.