Nifty MidCap 100 surpasses 40,000 mark for the first time
The Nifty MidCap 100 index has crossed the 40,000 mark for the first time, while the Nifty SmallCap index reached a new all-time high of 12,701.05. This comes despite concerns raised by analysts over higher valuations. In the last 15 sessions, the MidCap 100 and SmallCap gained in 13 and 12 sessions, adding 6% and 8.4%, respectively. So far this year, the indices have gained 27% and 30%, respectively, with bulls in the space ignoring cautionary advice from several brokerages.
Analysts predict a continued rally in SmallCap, MidCap indexes
Despite concerns, some analysts believe that the rally in SmallCap and MidCap stocks is likely to continue. They suggest that investors are now focusing on fundamentally strong stocks that faced setbacks recently. These stocks are benefiting from changing business cycles, increased demand, positive outlook, attractive valuations, improved financials, and robust domestic economic factors.
Analysts ask investors to proceed with caution
According to Nirmal Bang Equities CEO Rahul Arora, the market is facing a shortage of solid investment opportunities. Hence, investors are crafting stories for stocks they wouldn't generally consider. This is leading to previously overlooked stocks suddenly becoming expensive. Nilesh Shah, Managing Director of Kotak Mahindra AMC, warns investors to tread with caution in the small-cap and mid-cap space, stating that "there have been a lot of frothy valuations built up."
Overlooked stocks gain attention, sector re-rating
Kotak Institutional Equities acknowledges the broad-based rally but remains uncertain about the factors behind it and the divergent performance across sectors. However, the brokerage believes that certain sectors in the mid-cap and small-cap space deserve a re-rating. These sectors include smaller private banks, healthcare services, and real estate, as they had reasonable valuations prior to the rally and threw up a strong outlook.
