Mark Indias Momentum and Invest in Mid-Caps

While the global market continues to suffer, the Indian market appears to be the only ray of hope for global investors. The BSE Sensex is holding ground with marginal gains on YTD basis while Dow Jones Industrial Average is down by more than 13 per cent. Such outperformance is rewarding investors back home even as the broader markets continue to outperform the Large-Caps. The Mid-Cap stocks especially are in a sweet spot. Unique and unprecedented opportunities are being offered by the mid-cap universe as some of them promise to turn into the large-caps of tomorrow. 

Our cover story in this special ‘mid-cap issue’ highlights the outperformance of mid-cap stocks while also throwing some light on how to best deal with them. There are some inherent strengths while investing in mid-cap stocks and investors may not regret allocating more money to them. Meanwhile, our focus in the special story in this issue is on the defence sector stocks. The sheer size of capital expenditure outlaid for the defence sector makes investing in it a compelling proposal. We have also recommended two stock ideas in the defence sector that you can take advantage of.

There is a saying in the equity market: “Everyone is a genius in a bull market!” Hence, it is important not to get carried away. Bull markets tend to create lazy investors. If you are enjoying extraordinary gains in your portfolio stocks, it is time to sharpen your skills and hunt for fresh stock ideas. Further, there are a few acronyms that have been dominating the investment world for a while. One of them is TINA or There Is No Alternative (to stocks). A couple of quarters ago, when interest rates globally were at a multiyear low, equity was considered as the only asset class to invest in. 

Nonetheless, as transitory inflation becomes sticky and central banks around the world are taming inflation by increasing interest rates aggressively, the equity markets globally are seeing a correction and some have even entered a technical bear market, correcting by more than 20 per cent. The Indian equity markets too saw a correction but owing to its strong resilience it has relatively outperformed most of the equity market. There are very few major nations except for some energy-exporting countries that are growing as fast as India. 

India’s GDP growth during the first quarter of the current fiscal stood at 13.5 per cent. When other nations are staring at recession or marked slowdown in the GDP growth rate, a double-digit growth rate for the first quarter and more than 6 per cent for the entire year signifies welcome relief to all. Even the recent high frequency data suggests that the momentum is intact. A measure of India’s services sector shows recovery from a four-month low, led by job creation and new businesses.

What is heartening to note is that the broader market has outperformed the frontline market in India recently. The equity markets in India are in no mood to submit to the bears. The breadth is healthy and the way Small-Cap and mid-cap stocks are gaining momentum, one may tend to say that money making has never been so easy! We at DSIJ will always present the most promising investment ideas to you. Keep in mind that some extraordinary times lie ahead of us! 

RAJESH V PADODE
Managing Director & Editor