Bargain hunting: 10 midcaps that can deliver up to 50% return post selloff

NEW DELHI: The recent slide in midcap stocks might have scared investors badly. Many of these stocks have fallen up to 15 per cent from their recent highs, making a strong case for bargain hunting, say analysts.

Many of these midcaps were trading at a huge premium over their largecap counterparts till the other day. They have since moderated from their all-time high levels, analysts say. (See chart)

If you have the risk-taking ability and are looking for wealth creation ideas, midcaps is the space to look at, said Devarsh Vakil, Head of Advisory PCG at HDFC Securities, who noted that midcaps had started falling even before the global jitters hit the Street.

He said one can look out for midcap companies with sustainable business models and promoters with high integrity. Make sure that valuations of such stocks have come off to reasonable levels, Vakil said.

While the BSE Sensex made an all-time high on January 29, the BSE Midcap index hit its record high on January 9 and has declined 8 per cent since. Some midcap stocks such as Adani Power (down 27 per cent), Reliance Power (down 22 per cent), Reliance Infra (21 per cent), Emami (down 18 per cent), Reliance Communications (down 18 per cent) and Bayer Crop Sciences (16 per cent) have seen sharp corrections in the interim period.

Motilal Oswal Securities believes the correction in midcaps has made stock picking a bit less challenging. While the brokerage does not rule out further correction in the market, it believes the recent weakness offers a good opportunity to accumulate quality stocks where valuations had turned expensive.

The domestic broking firm prefers stocks that are relatively unpopular but have favourable underlying dynamics and also counters where valuations are at a significant discount.

Motilal Oswal Securities has listed the following 10 stocks that have fallen over 15 per cent from their 52-week highs and where growth visibility is healthy and the outlook is strong.