As of Friday, out of 97 Midcap index stocks, 60 needed at least 20 per cent rise to revisit their highs: 40 among them needed over 50 per cent jump and seven needed at least 500 per cent surge, data compiled from corporate database Ace Equity suggests.
Analysts said the rally in the midcap space has been polarised. Only select midcaps have participated in the rally; and they too were the ones that usually have high market capitalisation and valuations, they said.
One of the stocks where new record highs look impossible is Union Bank of India. This PSU bank need an over 1,200 per cent rally to revisit its record high of Rs 426.80. At Rs 31.80 on Friday, this stock traded far below its 52-week high of Rs 53.40.
Other PSUs on this list of underperformers included Bank of India that needs a 1,055 per cent leap, BHEL (891 per cent), IDBI Bank (541 per cent), Canara Bank (526 per cent) and SAIL (279 per cent).
Vodafone (945 per cent), Future Retail (774 per cent), GMR Infra (377 per cent), RBL Bank (170 per cent), Adani Power (170 per cent), Jindal Steel (164 per cent), Glenmark Pharma (143 per cent) and Castrol India (111 per cent) are some of the private company stocks that need huge gains to revisit their record highs.
Sun TV, L&T Finance Holdings, JSW Energy, Cummins India, Tata Power, IDFC First Bank, LIC Housing and M&M Financial are other such stocks that requires 70-110 per cent gains.
The BSE Midcap index hit a fresh high of 19,161.2 on Friday, before closing the day at 19,138.72, up 1.01 per cent.
“The optimism that you are seeing is in the index, which is governed by the large midcaps, which have market-caps of Rs 30,000-40,000 crore. Traditionally, you won’t call them midcaps, but they are a part of the index,” said G Chokkalingam, Founder at Equinomics Research and Advisory.
One of the 17 Midcap index stocks that hit record highs in January 2021 is Honeywell Automation India. This stock enjoyed a market capitalisation of Rs 35,912 crore on Friday and a 12-month trailing PE of 77.73 times.
Jubilant FoodWorks, another stock that hit a fresh record higher in January, had a market-cap of Rs 38,435 crore and a P/E of 297 on Friday as per BSE. Among others, the prominent names include Crompton Greaves Consumer (53 times), Voltas (63 times), Berger Paints (130 times), Tata Consumer (99 times) and Kansai Nerolac Paints (84 times).
“The real midcap stocks are in fact down 30-40 per cent from their 2018 peaks. There is growing optimism in the stocks that have not participated in the rally, but have good managements, clean balance sheets and healthy earnings. Large midcaps are already trading at 60-70 times price multiples. Investors should make a distinction between the two segments and focus on stocks that offer valuation comfort, where future earnings are not fully factored in,” he said.
In a technical note, ICICIdirect said the midcap index has resolved out of the bear phase as it logged a resolute breakout from the three years’ falling trend line, indicating the resumption of a major uptrend.
This structural improvement made the brokerage confident that the broader market would relatively outperform the benchmark, going ahead, it said in a note.