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"There might be some correction that is absolutely required in any bull market but the ongoing rally will continue for at least one year if not more," he said.
Shankar Sharma believes the party will continue in the midcap and smallcap stocks for at least one more year. The BSE Midcap and the BSE Smallcap indices have advanced 131% and 197%, respectively, amid the ongoing rally on Dalal Street since March 2020. In an interaction with Money9, the co-founder and vice-chairman of First Global said that he likes chemicals, cement, steel, pharmaceuticals and technology sectors in the domestic equity market, adding that he also prefers semiconductors globally and automobile retailers in America.
In the chemical space, players like Sreechem Resigns have advanced the most 729% on a year-to-date basis. It was followed by Indo Amines (up 302%), Nikhil Adhesives (up 295%), Indo Borax & Chemicals (up 290%), Dhunseri Ventures (up 282%), Kanoria Chemicals (up 278) and Balaji Amines (up 262%).
According to Motilal Oswal Financial Services, the domestic specialty chemicals industry (valued at $32 billion) clocked double the global CAGR (11.7%) over CY15-20 and is expected to deliver a 12.4% CAGR over CY20-25 (on a higher base), reaching $64b by CY25.
Factors
“Various factors are in favour including strong domestic consumption-led by a young population – around 67% of which forms the working age group, favourable labour cost (one-third that of China or half that of Vietnam), and government impetus. The growth would be led by a strong demand CAGR of 10-20% in the export and end user industries,” the brokerage said.
On the other hand, Hikal (up 223% YTD), NGL Fine-Chem (up 201%), Jagsonpal Pharma (up 148%), Shree Ganesh Remedies (up 148%), Lyka Labs (up 130%) emerged as some of the top gainers in the pharmaceutical space.
Outlook
Commenting on the broader markets, Sharma said: “The small and midcap party will continue because broadly speaking they have been in a market for the last several years. It is only in the last 12 months time that we have seen them come to life. There might be some correction that is absolutely required in any bull market but the ongoing rally will continue for at least one year if not more.”