The broader markets are heading to close 2018 on a disappointing note after a stellar run in 2017. The year started on a strong note with midcap and smallcap indices hitting record highs in January but the correction in subsequent months stunted their growth trajectory.
Experts feel the key reason was the high valuations after a stupendous run in 2017.
The BSE Midcap index fell 15 percent (versus 48 percent rally in 2017) and smallcap plunged nearly 25 percent (versus 60 percent upside) while the 30-share BSE Sensex gained 5.6 percent upside (against 28 percent upside).
“Despite such huge corrections, midcaps are still relatively overvalued with respect to largecaps due to overly optimistic earnings projections,” said Vinay Khattar, Head of Research at Edelweiss Broking.
He further said earnings growth hasn’t matched the nominal GDP growth as well as the growth in valuation multiples for the past few years, in both Nifty and the broader market. “Such a mismatch has led to overvaluations in the Indian equity markets.”
Although the midcap and smallcap indices fell, some stocks stood out.
Among midcaps, top 10 stocks gained 20-62% this year. L&T Infotech rose the most (up 62 percent). Other stocks include Divis Labs, Havells India, Colgate Palmolive and Adani Power.