Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    
Google
Web www.equitybulls.com
Research

| More

India Equity Strategy Report - Small and mid-caps: wind in their sails - HDFC Securities

Posted On: 2020-09-13 22:24:13


Mr. Varun Lohchab, Head Institutional Research, HDFC Securities

SEBI's circular mandating multi-cap funds to allocate at least 25% of their AUMs in mid and small-caps each by early Feb 2021 has come as a surprise, given the large AUMs currently under the multi-cap category. We believe some of the large multi-cap fund schemes might opt to reclassify into (or merge with the existing) "large and mid-caps" category, given the difficulty of managing sizeable AUMs with a high proportion of relatively less liquid Indian mid and small-caps. However, this mandate would still lead to forced inflows into mid and small-caps over the next four months, especially small-caps, given the sizeable gap between existing and proposed holdings across most schemes. As per current holdings and no scheme reclassification, this shift would lead to an outflow of ~Rs. 350bn from large caps (top 100 stocks by market capitalisation) and inflows of ~Rs. 130bn into mid-caps (next 150 stocks), and ~Rs. 280bn into small-caps (beyond the top 250 stocks). As per our analysis, these inflows would amount to ~1.2% of total free-float of mid-caps and a whopping ~7% for small-caps.

We believe quality small caps that were impacted in the past two years by investor apathy and flight to safety might continue their strong show, which has been visible in FY21 YTD. Investors should remain disciplined and stick to fundamentals while selecting small-caps, given the fact that economic headwinds might persist for a while, and valuations for quality mid and small-caps are not mouthwatering after the run-up. We continue to see selective bottom-up investible ideas with favourable risk-rewards across all market caps. Consumer, IT, Pharma, Chemicals, Cement, and Agri/rural might remain the preferred sector choice for investors in the near term. However, we also see this as a potential catalyst for rerating of ignored stocks in the economy-facing sectors such as Infra/Industrials, Hotels, Auto Ancillaries, Financials and Real Estate, if there is a confluence of strong balance sheets and attractive valuations.

Interestingly, in some of the above sectors, the themes of "big becoming bigger" and "winner takes it all" do not hold true, given the fragmented nature of business and niche opportunities, which makes a multi-year investment case for strong small-cap business models within these sectors. High divergence of valuations between large caps and mid/small caps emerged over the past two years in sectors such as Consumer, IT, Cement, and Financials, which might normalise to an extent, helped by this catalyst and high retail investor interest.

- Our top mid-cap research picks are Mphasis, ACC, Crompton Consumer, IGL, Gujarat Gas, Max Financial, JK Cement, Endurance Technologies, Persistent, and Aarti Industries.

- Our top small-cap research picks are CDSL, KNR Construction, Alkyl Amines, Galaxy Surfactants, Radico Khaitan, PNC Infratech, Brigade Enterprises, Sonata Software, Mastek, and Ahluwalia Contracts.

- Our model portfolio already has a good blend of mid and small caps with a weightage of around 15%. We further add Persistent Systems, Aarti Industries, Endurance Technologies, and Radico Khaitan to our model portfolio and reduce our weightage in ICICI Prudential and Bajaj Finance.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com


Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

IPO Review - Computer Age Management Services - ICICI Securities

Company Update - EIH Ltd - ICICI Securities

Gladiator Stocks - Godrej Properties - ICICI Securities

Company Update - Dr Reddy's Laboratories - ICICI Securities

Gladiator Stocks: Pharma Thematic - ICICI Securities

Company Update - Housing & Urban Development - ICICI Securities

Covid Recovery Pulse - E-Way bill generation shows recovery signs with auto volumes flat - ICICI Securities

Quant Pick - UltraTech Cement - ICICI Securities

Lupin & Cipla - Positive News - Angel Broking

Sterling and Wilson Solar Ltd - 106.71 MW order win - Angel Broking

Dr. Reddy's Laboratories - Settles Revlimid litigation in US - ICICI Securities

Natco Pharma - Natco to launch first generic Revlimid - ICICI Securities

Solar Industries - Overseas and defence key to profitability - ICICI Securities

Federal Bank - Strengthening liability muscle; fees & charges revised upwards - ICICI Securities

HCL Technologies Mr. Jyoti Roy, DVP - Equity Strategist, Angel Broking Ltd

CAMS - IPO Note - YES SECURITIES

I-direct Instinct - Intellect Design Arena

P&G Health - Company Update - ICICI Securities

Relaxo Footwears - Mr. Amarjeet Maurya- AVP - Mid Caps, Angel Broking Ltd

Bata India - Mr. Amarjeet Maurya- AVP - Mid Caps, Angel Broking Ltd

Listing of Happiest Minds Technologies - Angel Broking

Dr. Reddy's Lab - Sep 17, 2020 - Angel Broking

VA Tech Wabag - Uphill task ahead; dilution at discount valuation - ICICI Securities

Polymer price tracker - PVC price hikes continue unabated - ICICI Securities

Brigade Enterprises - Resilience amid turbulence - ICICI Securities

Apollo Hospitals Enterprises - Recovering well from COVID-19 impact - ICICI Securities

NTPC - Sustainability targets encouraging - ICICI Securities

Gladiator Stocks - Oberoi Realty - ICICI Securities

Gladiator Stocks - Automotive Axles - ICICI Securities

Quant Pick - IDFC First Bank - ICICI Securities

Company Update - Jammu & Kashmir Bank - ICICI Securities

India Aviation Data - August 2020 - Angel Broking

Shree Cement - Higher volumes to offset lower prices - ICICI Securities

Apollo Hospitals - Q1FY21 Result Update - ICICI Securities

Refining & marketing - Oil price fall boosted GRMs, to push marketing margins up - ICICI Securities

Mr. Deepak Jasani, Head of Retail Research views on FICCI National Executive Committee Meeting with Reserve Bank of India Governor Shaktikanta Das

India trade deficit for August 2020 - Angel Broking

Chemcon Chemicals IPO - Mr. Keshav Lahoti - Associate Equity Analyst, Angel Broking Ltd

CAMS IPO - Mr. Jaikishan Parmar - Sr. Equity Research Analyst, Angel Broking Ltd

August 2020 Trade Data - Acuité Ratings & Research

Wim Plast - Q1FY21 Result Update - ICICI Securities

Company Update - Mishra Dhatu Nigam - ICICI Securities

Stock Tales - Laurus Labs - ICICI Securities

Stock Tales - Granules India - ICICI Securities

Stock of the day - Chalet Hotel - Target INR 200 - Angel Broking

Upgrade to ADD on Dr. Reddy's Labs - Improved visibility in the US business - HDFC Securities

Monetary Policy post CPI inflation numbers for August 2020 - Angel Broking

HUDCO - Q1FY21 Result Update - Angel Broking

Update on Steriscience pharma - Angel Broking

Covid-19 vaccine development by AstraZeneca - Angel Broking







Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019