The Hindu Business Line : Mid-cap stocks shine post-budget

AFTER giving high returns last year, mid-cap stocks are again on the buy list of most of the investors, especially after the Union Budget, with their returns better than large cap stocks.

Brokers and analysts attribute higher gains for mid-cap stocks due to under-ownership, low liquidity and active interest of market operators who are pushing the stock prices higher with minimum effort.

A comparison of various stocks indices between July 8 (Budget day) and August 23 shows that the NSE's CNX Mid-cap index gained 15.74 per cent almost three times more than other stocks indices.

The BSE-500 index gained 6.63 per cent, BSE-200 5.82 per cent, BSE-100 5.01 per cent and the Nifty Junior jumped 5.14 per cent.

However, the benchmark indices BSE Sensex gained 4.55 per cent and S&P CNX Nifty gained 3.95 per cent.

According to stock broking firm Batlivala & Karani Securities key rationale for investment in mid-cap stocks is high earnings growth potential, attractive valuations and under-ownership.

Mr Arun Kejriwal of KRIS Research said most of the mid-cap stocks have low liquidity and even a small demand skews supply ratio causing large increase in value.

However, Mr Ambarish Baliga, Vice-President, Karvy Securities, views interest in mid-cap stocks due to different reason. "Institutional investors activity in the market has come down after the Lok Sabha elections and due to this, operators are active in mid-cap stocks.

Mr Ashu Dutt, a market analyst and author of Greed & Fear Journal — a weekly investment journal, said: "They are just easier to take up or down. Low volumes mean any big buy or sell move will swing them sharper".

Mr Dutt cautioned the bigger problem is the management quality in most of these companies. "Don't go by PE ratios etc. If you have been in the market long enough you know how many of them go belly up"