16 midcap & smallcap picks from Edelweiss to bet on essential businesses
These essential businesses proved to be a hedge against the supply disruption as well.
By ET Bureau | Updated:
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“These new ‘virus defensives’ proved to be supply hedges. Maybe, this added predictability to their earnings trajectory makes them re-rating candidates,” said Aditya Narain.
MUMBAI: Small and mid-cap stocks from the essential businesses with strong balance sheet such as Dr Lal Pathlabs, Exide Industries, SIS India, Mahanagar Gas, Quess Corp, Dhanuka Agritech, Cyient, Mahindra Logistics likely to gain in terms of market share and likely to be re-rated, according to Edelweiss Securities.
While classic defensives offer downside protection only in demand downturns, these essential businesses proved to be a hedge against the supply disruption as well. Besides the well-known defensives of staples, pharma & healthcare, IT, there are interesting categories like agri-inputs, power, telecom, freight rail, private security, facility management, dairy, express services, among others have a lower downside beta with the economy and slightly higher beta on the upside, said analysts.
“Classic defensives are well known, but these new ‘virus defensives’ proved to be supply hedges. Maybe, this added predictability to their earnings trajectory makes them re-rating candidates,” said Aditya Narain, head of research, Edelweiss Financial Services. “There are 10-12 sub-sectors where competition may bleed deeply and concede market share to leaders”.
