The Nifty 50 exceeded the 17,000 mark in August 21 to reach a record high, after remaining muted over the last two months, driven by strong inflows by FIIs/DIIs, and a good end to the Q1FY22 corporate earnings season. Though, the Nifty Midcap 100 and Nifty Smallcap 100 underperformed the markets last month. Among the sectors, technology, utilities, telecom, finance, and consumer were the outperformers in August whereas media, PSU banks, real estate, metals, healthcare and autos were the only laggards.
Markets are continuing to scale new highs led by strong earnings delivery, benign liquidity and buoyant sentiments. Midcaps and small-caps have been outperforming in CY21 amidst a very busy primary market activity. In the last 12 months, midcaps have risen 70% as against a 50% rise for the Nifty. In P/E terms, the Nifty Midcap 100 is now trading at a 9% discount to the Nifty.
“Management commentaries across the board suggest an improved demand environment post June’21, led by the easing of restrictions, lower active COVID-19 cases, and a pickup in vaccinations. Amid the buoyant sentiment and elevated activity in the primary markets, Nifty valuations at 21.8x 12m forward EPS remain rich. Thus, consistent delivery on earnings expectations becomes crucial going ahead,” Motilal Oswal said in a note.
Motilal Oswal’s top stock picks in the midcaps space includes names like Max Financials, Chola Finance, JK Cements, Indian Hotels, Deepak Nitrite, Orient Electric, Solara, Zensar Tech, L&T Technology, and Aditya Birla Fashion and Retail (ABFRL).
The brokerage remains overweight on BFSI, IT, Metals, Cement, and Capital Goods whereas it remains neutral on Consumer, Auto, and Healthcare and underweight on Telecom, Energy, and Utilities sectors.
Its largecaps top ideas includes ICICI Bank, State Bank of India (SBI), Infosys, HCL Technologies, UltraTech, HUVR, Titan, Divi’s Labs, Hindalco, and SBI Cards and Payments.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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