While the Sensex and large-cap stocks have been battered in a roller-coaster ride in recent months, mid-caps, always the worse hit in difficult times, have been under severe pressure since the beginning of this calendar year.
In the bloodbath, there could be basement bargains lurking, say investment analysts. That, they say, is for the discerning long-term investors who has the patience to back the money put in. But caution must go with patience, they add.
“Most of the quality mid-cap stocks are quoting at multi-year low valuations. I don’t see much of downside from these levels,” said Gaurav Bhandari, MD, Centrum Broking. “We expect broader indices to move up sharply from these levels. The valuation of mid-cap stocks looks very compelling.”
However, Aneesh Srivastava of IDBI Federal Life Insurance says that investors should carefully weigh options. “It is better to wait before increasing exposures in mid-caps as we may get better entry levels in select mid-cap stocks,” he said.
But, the traditional investing wisdom that mid-cap stocks are more risky compared to large caps, is playing its role as a weak rupee, high interest rates and political uncertainties plague India's economy.
While the Sensex has lost only 0.36% from the start of the year, the BSE Mid-Cap Index has lost nearly 16%. The the gap between the two indices has significantly widened over the past six months, with the mid-cap benchmark going steadily downhill even as the Sensex yo-yoed.
The general market mood is negative. A large part of Sensex returns have come from the traditionally 'defensive' sectors such as fast moving consumer goods, pharmaceuticals and information technology, reflecting the bearish mood in the market.
Some experts feel the pressure on mid-caps is likely to continue and mid-caps may have to wait for their day in the sun. “Once the Sensex makes new highs, mid-caps are likely to come into greater focus,” said Mayuresh Joshi, vice president, institutions, at Angel Broking.