After a year of turmoil, midcap stocks have outperformed the benchmark indices in the last one month as quality midcap stocks see value-buying by investors. The BSE Midcap index has gained over 2 percent in the last one month as compared to a 0.2 percent rise in BSE Sensex.

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As the economic slowdown drags on and macro data continue to spook the market, many pundits believe that mid and smallcaps have become very risky and should be avoided. The Association of Mutual Funds in India (Amfi) data also shows that investors put maximum money in largecap funds last month.

The midcap and smallcap segments have been the worst hit in the market mayhem. BSE Midcap index is down over 11 percent in 2019 and over 14 percent in the last one year. In comparison, the benchmark has gained 3 percent in 2019 and fallen over 1 percent in the last 1 year.

Outlook

While most market experts still prefer largecaps amid the ongoing volatility, some believe that time is right to invest in broader markets. Gautam Shah of JM Financial said that the broader markets have underperformed frontliners by a wide margin and after a steep fall, he believes this is a great time to buy midcaps and sees room for a 1,000-point recovery in the midcap index.

"We continue to back growth at a reasonable price. We believe the way to construct portfolios is to buy stocks of companies with the highest delta in return on capital. We expect market performance to broaden; hence, we also like mid-caps where the forward growth is not reflecting share price performance," Morgan Stanley said in a report.

Stock performance

In the last one month, of the 105 stocks in the BSE Midcap index, over 65 or 64 percent stocks were in green, while the rest 38 (or 36 percent) were negative.

Fourteen of the gainers rose over 10 percent. Among these, Wockhardt gained

the most, up 20 percent, followed by Honeywell Automation and HUDCO, which rose 19 percent each. Meanwhile, IDBI Bank, GSK, DHFL, Tata Power, Endurance Tech, Concor, GMR Infra, ICICI Securities, NBCC, Adani Transmission and Adani Entreprises were up between 10-15 percent during this period.

Other stocks like NALCO, Colgate, Divi's Labs, Adani Power, Castrol India, Motilal Oswal, Ajanta Pharma also gained in the last one month.

Among losers, Reliance Capital fell the most, down 24 percent, followed by Edelweiss Financial Services, down 23 percent. LIC Housing, Canara Bank, Reliance Infra, PNB Housing, and Indian Bank also slipped between 9 and 15 percent in the last one month.

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