Put checks and balances: 5 midcap stocks from different sectors with potential upside of up to 34%

As the market opens for trading after a holiday, the first hour of trading would go into adjusting with what happened in global markets. The short term movement aside, one needs to take into account that in the next few days movement of the broader market indices like Nifty and Sensex and also the market breadth would be determined by the outcome of the state elections.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.

The movement of nifty and sensex needs to be delinked with what has happened in the last quarter and what might happen to mid-cap in the coming quarter. 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. Now how does one do it, simple, have a look at fundamentals and it is not very tough, having a look at some of the critical ratios like ROE and ROCE would help in committing silly mistakes. 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 mid cap space.

Despite the fact the valuations are high and there are many headwinds both in terms of geopolitical risk and central banks policy making, the correction which is taking place in the market is not of the same magnitude which in the past such mews flow has brought. So at one level while the correction is taking place but at the same time, the under current is still that of hope. In such times of divergence, it would be better to add the words like portfolio rejig, caution, fundamentals and valuations to one’s thought process while buying stocks. Refinitiv’s Stock Report Plus which lists stocks with high upside potential over the next 12 months, having an average recommendation rating of “buy” or strong buy .

As broader market indices witness minor consolidation, which normally happens when they are close to all time high as some resistance is bound to come. Some stocks have witnessed consistent improvement in their scores. The 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.

While a correction is taking place in the market and is visible in all segments of the markets. The question which needs to be asked is, why the correction is taking place. Is the reason any issue in global markets or local macroeconomic headwinds or is it just that valuations had seen a run up very sharply and now they are just correcting due to profit booking. At this point of time, the answer is the last one “ valuations”. But what about a sector where the valuations never were so high or a sector which has just seen a fundamental improvement in the operating matrix. Should that also see a correction? The fact when a broad based profit booking is happening than even the stocks and sector where are not in the over priced category will also see a correction. But probably those are the sectors which should be on the watchlist because when valuation readjustment is over, they might be the ones who would be leading the next round.

Once again everything is looking green, the way FY 25 has started, it appears that bulls were on short term break due to tight liquidity conditions which tends to appear in the last month of every financial year. While the local liquidity condition might improve, the issue of high valuation is still not over. It is still a time to be cautious in terms of not going overboard with taking exposure to a certain stock, selective about what one is buying. The reason, if the street becomes selective and gets into correction mode once again, it is stocks where there has been improvements in the business operating matrix will be able to weather the storm better. 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.

For most, market movement this week may not appear volatile, but the fact is last week was pretty much very volatile both at the index and market breadth level. First three days of decline and then two days of up move. But the underlying bias of the market is still bearish as even when the Nifty was trading in green, the market breadth was not very positive. So it would be better to be selectively bullish and put more checks and balances both in terms of quantitative and qualitative parameters while looking at stocks.

Stay bullish, but just add an element of caution which means stay with quality. There is quality in every segment of the markets, but when one is buying midcap stocks it is more important to focus on quality as these companies and also their stocks may have relatively less ability to withstand a corrective phase, either because of the nature of the business or because of technical reason like shareholding pattern. Following stocks have come from Refinitiv’s Stock Report Plus which lists stocks with high upside potential over next 12 months, with average recommendation rating of “buy” or strong buy

At a time when markets are volatile, a small up move in Nifty gives a sense of relief, but does it make your portfolio better to weather another round of decline in both Nifty and Sensex. One set of stocks which should be looked at all times is the high dividend paying stocks. The reason, they tend to do better, when markets are volatile with bearish bias, which they were till a couple of months ago.

Whether it is the bullish or bearish phase of the markets, it always pays to stay with a better quality of balance sheet and in companies which have the ability to withstand the slowdown which every economy faces at different points of time. Especially when valuations are not cheap by any standard, it would be good to stay with large caps if one is thinking of increasing exposure to equity. 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.