Only 10% of midcap, smallcap stocks denied a fall in May; Analysts suggest this
Only 10 per cent stocks of BSE Midcap and Smallcap have so far been able to give investors double-digit returns in May. This indicates a weakness in the broader market that has led to lower benchmark equity indices in the month.
Market observers believe that growing concerns over inflation, the astonishing rate hike by the Reserve Bank of India (RBI), continued selling pressure by foreign institutional investors and mixed quarterly results have weighed on market sentiment this month.
Overall, BSE Midcap and Smallcap cracked 7 percent and 8 percent, respectively, on a month-to-month basis. On the other hand, BSE Sensex fell 4.81 percent during the same period. Overall, seven stocks in the BSE Midcap and Smallcap indexes have returned more than 10 percent to investors in May, while 97 other stocks in the index have been able to keep their heads above water.
Commenting on the wide space, market veteran Shankar Sharma, vice-chairman and joint managing director, First Global, said Business today Midcaps and smallcaps are areas where you can earn outside because many companies are doing very well. However, he added that just because companies are right does not mean that share prices will fall. This is a long-term event.
With a 23.80 percent gain so far in May, TD Power Systems has emerged as the top gainer on the list. It is followed by Gokaldas Exports (16.10 per cent), Honda India Power Products (16 per cent), Gujarat Gas (15.40 per cent), Sharda Cropchem (13.90 per cent), Vadilal Industries (13.40 per cent) and Mangalore Refinery and Petrochemicals (10 per cent growth).
How to pick stock from wide market?
The stock market is complex and volatile. To make a smart return, one must know the market vibrations and understand how it works.
Ravi Singal, vice chairman of GCL Securities, said there was no proven strategy to maximize earnings from the stock. However, there are some basic rules that, if followed, can be helpful in reducing risk and earning a better income.
He advises investors to invest in businesses that have good knowledge. “Investing in a diversified portfolio of stocks can help reduce risk and maximize returns,” Singal added.
For beginners, it is advisable to invest in large companies as it limits the risk. The size of the company can be calculated with the help of market capitalization. Singal added that investors should also focus on valuations before choosing stocks.
“For beginners, it is advisable to invest in stocks with a P / E of 10-25. Companies that have given consistent results in the past should also have zero,” he said.
It is advisable to invest in stocks of companies with limited liabilities. This can be assessed from the debt to equity ratio, which is a comparison of the total liability by a company’s shareholder equity. A high debt-to-ratio ratio means more leverage in a company and such stocks should generally be avoided.
To buy stock
In midcap and smallcap space, brokerage Motilal Oswal Financial Services Ashok Leyland, Macrotech, APL Apollo Tubes, Chola Finance, Indigo Paints, Restaurant Brand, TCI, GR Infra, Dalmia India, Lemon Troy.
On the other hand, brokerage Anand Rathi shares and stock brokers Binti Organics have a positive price of Rs 2,350. “We are positive about the long-term performance of Binti and expect revenue, EBITDA and PAT to be 27 per cent, 34 per cent and 32 per cent CAGR as compared to FY22-24 considering strong demand due to increase in butyl fennel. The use of antioxidants and ATBS, ”said the brokerage.
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