Mid-Cap Stocks Remain Expensive Despite A Poor Run This Year
The mid-cap index continues to trade at a premium to its historical valuations, shrugging off a poor run compared to the benchmark Nifty 50.
The mid-cap gauge has fallen in five of the eight months this year. It’s down 9.6 percent year-to-date against an 8.9 percent rise in the Nifty 50. Yet, it trades at 23.85 times its one-year forward earnings, a premium of 19.5 percent over the five-year average.
The twin macro headwinds of a weakening rupee and rising crude oil prices will have an overhang on mid-sized companies over the next six to nine months, said market analyst Avinash Gorakshankar. Lack of a meaningful earnings growth means, according to him, these valuations may not be sustainable.
More than 500 points were wiped out on Tuesday, pulling the Nifty Midcap Index below the key support level of 200-day moving average.
There can be some more pressure on Midcap 100, said Gaurav Bissa, derivatives analyst at LKP Securities. “It can fall till 18,950-19,000 levels, which was the previous breakout level and should now act as support.”