Citi said the 30 per cent underperformance of the mid-cap index compared to the Sensex in the past two years merits the question whether it’s time to buy mid-caps.
By ET Bureau |
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The discount in mid-cap valuations to large-caps is close to a 10-year high.
Are mid-cap stocks set for a comeback? As the benchmark indices — Sensex and Nifty — touched new highs on Tuesday, analysts are wondering if the action would shift to the underperforming mid-cap stocks soon. Citi said the 30 per cent underperformance of the mid-cap index compared to the Sensex in the past two years merits the question whether it’s time to buy mid-caps.
“Historically, mid-caps have usually done well in periods of good economic growth – difficult to make a strong case here, we think. However, with better risk-reward post underperformance, we would selectively look to add midcaps,” the investment bank said. The discount in mid-cap valuations to large-caps is close to a 10-year high. “Interestingly, this compares to highest premium to large caps in 2017 – so in two years, midcap sentiment seems to have gone from extreme optimism to huge pessimism,” said Citi.
