The mid and smallcap stocks are trading higher following the overall benchmark indices. The BSE Smallcap index is up over 2% at 44,811.53 around 12.15 PM. Market participants said that the surge in the mid and smallcap stocks is on the back of positive sentiment across Dalal Street and value buying.
Not just the small and midcap stocks, but the overall markets are also trending higher. The Nifty 50 jumped 273 points or 1.2% to trade at the day’s high of 22,781.40 while the Sensex rose 924 points or 1.25% to surge past the 75,000 mark.
Value buying small and midcaps
Most market observers believe that there are select pockets of value emerging in the small and midcap space. According to market expert, Ajay Bagga, “Given the strong domestic inflows, especially in small and midcap funds, we are seeing a sharp recovery in the broader indices. As corporate earnings show an upward trajectory at lowered valuations, these will look attractive to incremental domestic flows.”
In a recent interview with FinancialExpress.com Nilesh Shah, Managing Director at Kotak Mahindra Asset Management Company, said that it’s a fair value market. The quality small and midcap stocks are bottoming out and are near their historical averages.
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Most key market observers and economic experts are pricing in the possibility of a rate cut in April which could boost liquidity further coupled with improvement in macros. This is also seen as a positive development and helping investor sentiment. According to Bagga, “The correction in the leading indices and the 20% plus fall in the broader indices is nearing an end. Domestically the India macro is improving, with the economy having made a bottom in the September 2024 quarter and corporate earnings probably having made a bottom in the December 2024 quarter.
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On the government expenditure catch-up, December capex was up 91% y-o-y and January capex was up 51% y-o-y. The tax revenues are pointing to a recovery in the broader economy. Aggregate demand will benefit from the triple front action by RBI in terms of the rate cut, macro-prudential credit easing and liquidity injection on a massive scale.
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