Nifty Midcap 100 scales fresh peak, analysts see more upside ahead

Mumbai: The Nifty Midcap 100 index climbed for the fourth straight session and closed at a record high Wednesday amid tepid broader markets as investors rewarded companies that delivered a strong set of earnings and offered a promising growth outlook.

Analysts said that the momentum is expected to sustain with scope for 20% gains in the medium term.

The Nifty Midcap 100 index rose 0.4% to 62,558.85 on Wednesday while benchmark Nifty remained flat. In the past four sessions, the Nifty Midcap 100 index gained 2.1% while benchmark Nifty advanced 1.1% in the same period.

Adani Total Gas emerged as the top gainer on the index on Wednesday, surging over 13%, while Exide Industries and Swiggy jumped 7.6% and 6.6%, respectively. Tube Investments of India and Suzlon Energy rose over 5% each.

“Most of the stocks in the Nifty Midcap 100 index, such as BSE, Polycab and MCX, witnessed strong momentum, driven by the earnings visibility and growth outlook,” said Sunny Agrawal, head of fundamental research, SBI Securities.

Both midcap and smallcap stocks saw strong commitment recently as some companies were chased by retail and institutional investors, said Agrawal. Since the ceasefire between US and Iran was announced, the Nifty Midcap 100 jumped 10.1% while Nifty Smallcap 100 and Microcap 250 indices surged 18.1% and 13.2%, respectively.
“The earnings momentum in the midcap 100 stocks led the index to record highs; however, the smallcap 100 index is about 7% away from all-time highs,” said Ajit Mishra, SVP Research, Religare Broking. While large-caps bore the brunt of foreign selling, fund flows in mid and smallcaps remain favorable, he said.So far this year, the Nifty Midcap 100 index gained 3.4% while benchmark Nifty dropped 8.5% in the same period. The Nifty Smallcap 100 index advanced 3.2% in the same period.

About 60% of the stocks in the Nifty 100 index are trading above their long-term averages with most of them either at or close to fresh highs, as per Religare Broking. Investors are advised to focus on stocks and sectors with earnings potential and not narratives, said analysts. “Domestic facing themes like defence, power, and industrials got decent traction due to government outlay and could continue to see continued buying interest that could propel the index about 20% higher in the medium term,” said Mishra.