Even though the BSE Midcap index has not given robust returns in 2019 (down 4 percent), the index has risen nearly 70 percent in the last 5 years under Prime Minister Narendra Modi-led National Democratic Alliance government. In comparison, benchmark equity indices Sensex and Nifty rallied over 50 percent in the same period.
Furthermore, exit polls on Sunday indicated PM Modi will likely retain power in after the 2019 Lok Sabha elections with an even bigger mandate than in 2014.
Over 50 BSE Midcap stocks plunged up to 80 percent post the IL&FS carnage last year, however, analysts expect midcaps to gradually recover and do well in FY20 (post elections) on improving business prospects, falling interest rates, and expectation of NDA winning the general elections.
Nevertheless, under the Modi government, 35 BSE Midcap stocks surged over 100 percent. Honeywell Automatic was the top performer (up 534 percent) followed by 3M India (up 476 percent), Whirpool (up 415 percent), Rajesh Exports (up 414 percent), Indraprastha Gas (up 369 percent), and Motilal Oswal (up 345 percent).
TVS Motor Company, Havells India, Godrej Properties, Voltas, Torrent Pharma, Divi's Labs, Biocon, Gruh Finance, and Edelweiss Financial Services were some of the other midcap companies that rose over 100 percent in the last 5 years.
Among losers, Reliance Power, Reliance Infra, Reliance Capital, Bank of India, Adani Enterprises, and Union Bank of India fell up to 92 percent in the same period.
According to market experts, the fall in the midcap stocks in the last 1 year has made the valuations attractive and going forward, investors should focus on midcaps having high earnings growth from a long term investment perspective and avoid companies where promoters have high pledging of shares.
Among midcaps, JM Financial recommends Kalpatru Power, KEC International, KNR Constructions, Praj Industries and Orient Cement for elections. Motilal Oswal suggests investing in Federal Bank, LIC Housing Finance, Indian Hotels, Siemens, Ashoka Buildcon, JSPL, and Godrej Agrovet.
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