Opportunities Still Exit in MidCap Space: HSBC Report

Economic Times has come up with a note stating that there are still opportunities exits in the midcap space even though the stocks have run up a lot in recent time. Noting HSBC report, ET shows that despite this performance, the universe still trades at a 20 per cent discount to large-cap companies.

Jitendra Sriram, Equity Strategist and Head of Research, HSBC Securities believes that although the BSE Midcap Index is currently trading at an all-time high and has outperformed largecaps in the first half of 2015, the trend is expected to continue in the foreseeable future.

As the economy enters an upcycle, it will impact midcap companies the most in a positive manner. In the initial period, HSBC expects better plant utilisations and consequent improvement in cash flows to drive earnings.

This may later start reflecting on financial leverage, as well as the market rate structures that may start drifting southwards. Lower crude and commodity prices should improve margins for the midcap space, added the report.

Further, rise in domestic investors is positive for midcaps. The domestic equity investor made a return in the first half of 2015, which is positive for the midcaps universe. Historically, we have seen a positive correlation between DII interest and midcaps returns.

An analysis of SEBI's flows suggests that DIIs pumped in $5.2 bn into the markets during the period - a multi-year high. DIIs' ownership in midcaps has risen sharply (DII stake in midcaps up from 10.7% in 4Q11 to 15.2% in 2Q15), added the report. 

Given a chance,we will be buying Force Motors from the list of 10 stocks


Force Motors - Recommended by Daljeet Singh Kohli, IndiaNivesh Ltd 

His conviction as below :-

It is a very good quality company which is available to you right now with good valuations compared to Eicher or MRF or anything. So, people are expecting that this company will ultimately be in that league.

Force Motors is planning to scale up its business to a large extent, which is right now in very few numbers. After the expansion, it will increase its production to 50,000 units from 20,000, which will mean that this can be a multi-fold size company from here till next three to five years and all this will be done with very high quality of management.

This is the quality that is being chased and the expectation that this can be another multibagger like Bosch or Eicher or anything. So, those who are holding, they should not even think of anything, they should just stick to it; those who have not bought it at every price they will feel that they have been left out so we will rather say that if you have to have it in your portfolio, you should take that plunge and buy.

Read the full report here

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