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Brokerage Motilal Oswal Financial Services is positive on midcap players like JK Cement, AU Small Finance Bank, Jindal Steel and Power (JSPL), Tata Consumer, Oberoi Realty, Indian Energy Exchange, ICICI Securities, Varun Beverages, Security and Intelligence Services (SIS) and Gujarat Gas amid the ongoing rally in the domestic equity market.

Barring SIS (down 12%), shares of other companies in the list have already gained between 5% and 84% in 2020.

Of late, the BSE Midcap index scaled its fresh all-time high of 19,363 on January 13 after a prolonged consolidation in the broader market since the beginning of 2018. On the other hand, the BSE Smallcap index is still down nearly 7% from its lifetime high of 20,183, scaled on January 15, 2018.

Companies through rank from 1 to 100 in terms of market capitalisation are large caps. From 101 to 250 are classified as midcaps and from 251 and above are smallcaps.

Sensex on a roll

The benchmark BSE Sensex, which hit its all-time high of 49,795 on January 13, had advanced more than 15% in 2020 despite the Covid-19 related challenges.

According to market experts, nearly 80% reduction in active coronavirus cases, strong corporate earnings in September quarter which resulted in upgrades, faster than anticipated economic and demand recovery along with a supportive liquidity and interest rate backdrop have provided the necessary support to the Indian equity market.

Zooming profit

For the September quarter, the aggregate profit expectation for Nifty50 companies was of Rs 75,000-80,000 crore. However, the actual numbers came way above at around Rs 1.10 lakh crore, according to Kotak Mutual Fund.

“Economic indicators continue to turn positive which could start next upgrade cycle and liquidity flows across emerging markets could remain strong which bodes well for Indian markets. We also expect the government to prioritise growth in its forthcoming Budget,” said Motilal Oswal Financial Services, while adding it is overweight on BFSI, IT, healthcare, cement and auto sector, while it is ‘Neutral’ on consumer-oriented themes.

The brokerage also likes players like Infosys, Hindustan Unilever (HUL), ICICI Bank, State Bank of India, Divi’s Laboratories, Titan, Muthoot Finance, HCL Technologies, Mahindra & Mahindra and UltraTech Cement in the large cap space.

Commenting on the dichotomy between the economy and the equity market, Kotak Mutual Fund said, “Many people believe that the stock market and economy are getting delinked and the stock market is ignoring the reality of the market. We think that the stock market is only discounting the positivity about the future courtesy flows, courtesy sentiments and courtesy improving fundamentals.”