As many as 17 stocks in the S&P BSE 500 index rose 100-800 percent since August 14, 2017 to August 10, 2018 which include names like HEG, Graphite India, Indiabulls Ventures, Radico Khaitan, VIP Industries, NIIT Technologies, KPIT Technologies, V-Mart, L&T Infotech, Jai Corp, and Jubilant FoodWorks etc, among others.
Most of the small and midcap companies have done well in the last one year, although the broader market as a theme came under some pressure in the last 2-3 months. It was weighed down by higher valuations, regulatory concerns, the resignation of auditors as well as selling by foreign institutional investors (FIIs).
However, experts feel that companies with strong fundamentals have done well and in the event when the broader market plunged in double digits in a matter of days. Most of the stocks which more than doubled investors’ wealth in the last one year can still deliver 30-40% return from current levels.
After the initial decline, seen in the markets since February, most feel that the small & midcaps have bottomed out and there is a higher possibility of a recovery from current levels.
The momentum remains fairly strong which took the Indian market to record highs since July and experts feel that the rally is not over yet but stock selection remains key.
Small & midcaps have faced the maximum brunt of selling in the first six months of 2018 but things changed since July, and experts feel that broader market has bottomed out and there is a higher probability of recovery from current levels.
As many as 50 percent of the respondents feel that the small & midcap space has bottomed out while the remaining 33 percent feel that there could be some more pain.
The S&P BSE Small-cap index rose nearly 9 percent since the last Independence Day but there are as many as 35 companies which have more than doubled your wealth in the last one year which includes names like Nelco, Radico Khaitan, VIP Industries, NIIT Technologies, V-Mart, Intellect Design, Bombay Dyeing, and India Glycols etc., among others.
Historic performance should not be taken into consideration while short listing stocks for your portfolio. Yes, historic performance is important but the emphasis should be given to future growth prospects, as well as valuations compared to peers and key performance ratios before putting fresh cash to work.
Most of the stocks that do well have witnessed some structural changes which have fundamentally driven the earnings. Investors should focus on businesses which are capital efficient.
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Source: News18