November rally: Mid-caps outperform large-caps by 4%

Growth chart.

Mumbai, (Asian independent) Mid-caps stocks have outperformed large-caps by 4 per cent in November, said Motilal Oswal Financial Services in a report.

According to the report, over the last 12 months, mid-caps are up 14 per cent versus the Nifty’s rise of 8 per cent.

“Over the last five years, mid-caps have underperformed by 14 per cent,” the report said.

“In terms of P/E ratio, the Nifty Mid-cap 100 now trades at a 13 per cent premium to large-caps at 23.6x.”

As per the report, Nifty surpassed the 13,000 mark in Nov’20 to hit a record high after a 3.5 per cent rise in Oct’20.

It ended 11.4 per cent higher MoM in Nov’20 to close at 12,969.

“The rally was propelled by strong FII inflows, good corporate earnings season, and trends from the festive season, which suggests that the demand recovery continues.”

“FII and DII inflows showed record inflows and outflows, respectively. While FIIs continued their buying streak in Nov’20, DII inflows remained negative.”

The FIIs inflows increased to $9.6 billion in Nov’20 from $2.5.

Besides, the report cited that in recently concluded 2QFY21 results, one of the key and defining features of this performance was the better-than-expected focus on cost mitigation measures, apart from demand recovery and a healthy tailwind from gross margin expansion.

“2QFY21 was an optimum combination of gross margin expansion and operating cost reduction.”

Furthermore, it pointed out that market capitalisation-to-GDP ratio has been volatile.

“It increased from 79 per cent in FY19 to 56 per cent (FY20 GDP) in Mar’20 and 91 per cent at present (FY21E GDP) – above its long-term average of 75 per cent.”

“The rally since June’20 has led to the m-cap-to-GDP ratio being at its highest levels since FY10.”

In the model portfolio, the firm said it is ‘Overweight’ on IT, BFSI, Telecom, and Auto, ‘Neutral’ on Consumer.

“Sustenance of the demand recovery after the festive season would be key to any further upside in the markets.”

Additionally, the report “Bulls & Bears India Valuation Handbook” pointed that PSU Banks, Metals, Private Banks, NBFCs and Capital Goods were the top performers.

In contrast, Oil, Real Estate and NBFCs were the laggards.