The 50-share Nifty Indian stock markets have rallied 24 per cent to record highs since September 23, when Narendra Modi was announced as the prime ministerial candidate of BJP. The bluechip index seems to have taken a breather after edging above 7,500 levels on May 16, but broader markets continue to outperform.
The comeback of mid and smallcap stocks is heartening as it signals that retail investors might have started buying stocks. In 2013, small and mid-cap stocks returned huge losses of up to 16 per cent as compared to 7 per cent gain in the broader Sensex.
The CNX midcap index crossed the 10,000 mark for the first time on Tuesday. Over the last three month, this benchmark of midcap stocks has surged over 32 per cent as compared to 18 per cent rise in the broader Nifty.
Despite the sharp run up, midcap stocks are trading at 40 per cent discount to large cap stocks, says global investment bank Credit Suisse. The brokerage says Ashok Leyland, Emami, ING Vysya, Kajaria Ceramics, Oberoi Realty and TTK Prestige could emerge as big winners amid the current rally.
1) Ashok Leyland shares have gained 22 per cent in the last one month as compared to 13 per cent gain in the NSE's midcap index. The stock has been weighed down by sluggish commercial vehicle sales last year. The company hopes demand will pick up in the second half of the year due to new product launches slated for July 2014.
2) A sentiment boost is likely to lead to a revival in demand for property, which may benefit companies like Oberoi Realty substantially. Shares in Oberoi Realty are up nearly 14 per cent in last one month as compared to 20 per cent gain in the NSE's realty index.
3) TTK Prestige, home appliance maker, is a good bet as Mr Modi's promise of urban job creation and big ticket investments in cities. The company has been under pressure due to weak consumer spending. The stock has gained 12 per cent compared to 13 per cent gain in the NSE's midcap index.
4) Emami, ING Vysya and Kajaria Ceramics are likely to perform as the consumer sentiments turn.
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