Midcaps see bullish bets on higher prospects of outperformance in Dec

In the past 19 years, the Nifty Midcap 100 index has seen a rise 15 times during the last month of the year. The average monthly returns from the Nifty Midcap 100 index in December for the last 19 years are 4.77% compared to 3.15% from the Nifty.

“December is the month when markets have not sold off too much. If large-cap indices have moved up so much, so fast, then there is a bigger probability that retail, as well as high net worth individuals’ interest will shift from trading in Bank Nifty or large-caps to some of the smaller companies,” said Sandip Sabharwal, founder of investment advisory asksandipsabharwal.com.

The Sensex and Nifty have been on a record-breaking spree of late. In November, both the stock benchmarks gained over 4% as against the 1.9% up move in the Nifty Midcap100.

In the past week, however, the momentum has shifted in favour of mid-caps. The Nifty Midcap 100 index has gained 3% in the past week compared to a 1% gain in the Nifty.

Analysts said with midcaps yet to touch all-time highs, they could start performing better.

“Action has picked up as the ratio of midcaps versus Nifty has reversed off the confluence of support zone, which implies possible catch-up by mid-cap stocks,” said Pritesh Mehta, senior vice president of research at Yes Securities.

Raj Deepak Singh, analyst at ICICI Direct said the ongoing positive bias in mid-cap and small-cap spaces may continue while the Nifty may take a breather.

Mid-cap stocks have underperformed large-caps between August and November 2022, with foreign investors lapping up large-cap stocks to the tune of ₹1.05 lakh crore. They were consistent sellers between October 2021 and July 2022. Nifty is dominated by financials, IT and energy, which together account for 65% of the index’s weightage. These sectors account for just 32% of the Nifty Midcap 100.