The current market rally closely resembles the rally post the global financial crisis of 2008. In a recent report brokerage firm Edelweiss points out that the resemblance is not just in quantum and speed, but also the way SMID indices have outperformed large-cap indices.
Not only have indices doubled from the bottom within a year, but also the pattern among midcap and smallcap indices is similar. During November 2008-December 2009, Nifty rose 09 percent while Midcap100 and Smallcap100 indices had rallied 125 percent and 132 percent, respectively. In the current rally, since April 2020. Nifty has jumped 100 percent while the midcap and smallcap indices rose 114 percent and 140 percent, respectively.
In the report, Edelweiss Securities also screened out the most preferred stocks within the large SMID universe. It added Bajaj Electricals, eClerx, Ipca, Brigade, Sobha, Sterlite, LIC Housing, AU Small Finance Bank, Somany, Prince, Schaeffler, Galaxy & Century to the SMID model portfolio. Meanwhile, it removed IEX, JK Cement, ACC, MMFS and Gulf Oil from its portfolio.
Earnings estimates of SMID stocks ranked indicate one clear trend that FY22 estimates that saw sharp cuts during April-June 2020, bottomed out in September 2020 and have seen consistent upgrades since then, the brokerage observed.
From the market’s perspective, it’s this earnings outlook upgrade that has been at play, it added.
(Edited by : Ajay Vaishnav)
