For risk takers with a long-term perspective? 6 midcap stocks from different sectors with the right ratio

We are seeing a mean reversion phenomenon in the markets where the mid- and small-cap indices both peaked in October and are now experiencing a correction at a rate faster than the Nifty said Deepak Jasani, head of retail research at HDFC Securities. Investors display a sentiment of risk aversion and are not willing to wait longer, and hence are pulling out of the market booking profits wherever available or cutting losses.

Last week, the correction started with a private sector bank leading the fall. However, the very next trading session there was a sharp correction in mid-cap index and the markets breadth turned negative. This follow up of correction in a short span is a clear indication that high valuations are a weight on the street mind. This means higher probability of a correction in mid-cap space if there is any trouble with Nifty. So, be cautious while taking exposure as a correction mid-cap is more harsh in terms of price cut on individual stocks.

Besides the hit which nifty and sensex have taken, what is more important is that there are more declines than advances and that is largely due to market breadth in the mid-cap segment. This is indicative of continued profit booking happening at the broader market level. At this point of time, one cannot rule out more profit booking which can bring more damage to stock prices in the mid-cap segment. In such times, if one is taking fresh exposure to equity, ensure that there is some level of quality as far as the business and fundamentals are concerned. These selected stocks depict a strong upward trajectory in their overall average score which is based on five key pillars i.e. earnings, fundamentals, relative valuation, risk and price momentum. This implies that there has been a significant improvement in their market outlook in the given time frame.

Unlike last quarter of 2023, when nifty and sensex used to witness correction and mid-cap index was able move higher. Since the start of 2024, the mid-cap index is also participating in the correction, clearly indicating that some profit booking is taking place in this segment of the market. Having said that, if one looks at the flow of money to the mutual funds, a good amount of it is still coming in funds which are focussed on mid or small cap. There is no way one can fight with liquidity, if it is going to mid caps and they are moving up irrespective of valuations or quality of stocks one cannot argue. But the only thing which as an investor one can do is to be careful when taking exposure to this segment of the market. Stay away from stocks where there is a narrative that this sector will do well because of ABCD reasons or the company will get such and such orders worth this much. There is enough evidence in history to show that more than anything else, checks and balances are most important at this point of time, while making investment decisions.

Domestic equity benchmarks Nifty 50 and Sensex have fallen about 1.3 per cent each over the three sessions in the holiday-truncated week, culminating in a second consecutive week of losses, primarily driven by weakness in the banking sector.

Last three weeks have seen a correction both in terms of what nifty and sensex have witnessed but also in terms of market breadth coming underpressure. ET screener powered by Refinitiv’s Stock Report Plus applies different algorithms & filters to all BSE and NSE stocks, and lists stocks which fulfill the various criteria as specified into the algorithms & filters to find those which might help navigate the stock market.

After a long period of time, bears are seeming confident. How long they will be able to roam on the street is the question for which answers are being sought. For that it would be better to focus on why the correction is taking place. Whether there is just a profit booking after a long phase of out performance or there are any headwinds which the economy is either facing or is likely to face. The answer is very clear that this phase of profit booking and there are no headwinds, in fact there are more tailwinds of clear policy making. This is not to say that this corrective phase will not continue further, if there is any increase in oil prices, there might be some short term pressure, but the long term story stays intact. ET screener powered by Refinitiv’s Stock Report Plus lists down quality stocks with high upside potential over the next 12 months, having an average recommendation rating of “buy” or strong buy . The screener applies different algorithms for all BSE and NSE stocks.

At a time when everything on the street appears good and green, there is a case of being selective. The reason, if it is in a raging bull market, the street never stays in this all good and green mode forever.when the street starts to become selective, it is stocks where there are some improvement in the business operating matrix tend to weather the storm better. So as an investor, one needs to look at every sector and company and their operating and valuation matrix separately. These selected stocks depict a strong upward trajectory in their overall average score which is based on five key pillars i.e. earnings, fundamentals, relative valuation, risk and price momentum. This implies that there has been a significant improvement in their market outlook in the given time frame.

After remaining under the control of bulls, mid-cap stock witnessed a sharp correction early last week and also this week. There is some correction taking place in a few select sectors. However analysts are still bullish on select mid-cap stocks. ET screener powered by Refinitiv’s Stock Report Plus lists down quality stocks with high upside potential over the next 12 months, having an average recommendation rating of “buy” or strong buy . This predefined screener is only available to ET Prime users.