Mid caps heading north.

Mid cap stocks are gaining pace after sinking in first two months of the year. Mid-cap stocks almost erased all the losses of 2016 on renewed buying by Domestic Institutional Investors (DII’s). BSE Midcap index has gained by 4.5 per cent in last one month after correction in Jan-Feb 2016 session. We have analysed 195 Mid-cap stocks and have seen a huge turn around in many stocks. Many of the investors and analysts are bullish on Mid-caps on account of capacity expansion which lead to EBITDA growth around 20 per cent.

Indiabulls Real Estate Ltd., has given returns of around 54.36 per cent over last one month. Company has reduced its net debt by 16 per cent and also plans to launch two projects with 11 projects in hand at key metros. Leading Basmati rice exporter KRBL Ltd., has risen up to its 52 week high at 287.90 per share, giving one-month return of 37.34 per cent. Since previous fiscal year KRBL has outperformed the Sensex due to attractive business span of seed to grain and expanding distribution network. Manappuram Finance also has reached its  52 week high of 51.85` per share. MF’s total income has increased by 20.8 per cent and operating profit margin has expanded by 208 basis points to 69.42 per cent in 4QFY16. Carborundum Universal is also following in their footsteps and has reached its 52 week high of 227 per share because of improved profit margins. Strong operational profit in fourth quarter of FY16 was aided by lower expenses, which helped investors to gain 18.67 per cent in Raymond. Following the same storyline Advanta Ltd., Oberoi Realty Ltd., UPL Ltd., and Clariant Chemicals Ltd., have outperformed and have rewarded handsomely.

In last one month Sensex was flat however BSE Midcap performed well. Many of the Mid-cap stocks have surged up, backed by the factor of improved profit margins, and leveraged expenses due to lower commodity prices and better capacity utilisation. Out of 195 companies 63 have  posted improved profit margins. Though BSE Mid-cap gave return of 5 per cent in last one month, it has jumped up by a whopping 50 per cent in 2015-2016. Agriculture, Realty, Consumer finance, Microfinance, Chemical, Cement segments are looking good in a selective way with positive outlook on monsoon.