The Hindu Business Line : Beaten down mid-cap stocks back in focus

Some of the stocks from the mid-cap pack that performed well in the last month include Andhra Bank, Dish TV, Deccan Aviation, Everest Kanto Cylinder, Jindal Stainless, Titan and YES Bank.

These stocks climbed between 13 per cent and 45 per cent.

Aurobindo Pharma, Blue Dart, Max India and Pfizer are among the other stocks that saw a surge in their share prices.

Does this mean that the mid-cap sector stocks are finally catching up with the front-line stocks? Market men believe that “bargain hunting” has helped bring up the mid-cap index. “The mid-cap stocks had fallen more than the front line stocks during the bear run. The prices of these stocks have come down substantially which has led to some buying in these counters,” said Mr P.K. Agarwal, President- Research, Bonanza Portfolio.

Good run

The equity markets have had quite a good run in the last few days, so there are some small players creating small positions in certain mid-cap stocks, said Mr Alex Mathew, Head of Research at Geojit Financial Markets.

Mr P.R. Dilip, Managing Director, Impetus Wealth Management, said there has been a lot of portfolio shuffling happening and “serious” investors with a long-term (four to five years) horizon in mind are investing in certain good quality mid-cap stocks.

Analysts are of the opinion that even though the mid-cap index may have outperformed the Sensex, it is a rally which cannot be sustained for long.

“Any rally starts with the frontline stocks. The mid-cap and small-cap indices join the party later.

“The valuations of the mid-cap stocks had come down by as much as 60 per cent to 70 per cent, and this is just a technical bounce back,” said Mr Agarwal.

Mr Mathew also agreed that this mid-cap rally is not sustainable and that the large cap stocks would be the first to move up in a true rally.

“The frontline stocks are highly liquid and most of the FIIs will start buying these stocks,” he added.

Analysts also said that with the Government focussing primarily on bringing down inflation ahead of key state polls and parliamentary election, major reforms are unlikely to happen. Until then, FII inflows would be reduced to a trickle, they added.

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