As much as 16 per cent of mid-cap stocks in the domestic equity market have gained more than 75 per cent against their respective 52-week low levels amid the ongoing rally in the domestic equity market. With a gain of 14 per cent, the BSE Midcap index has outpaced the BSE Sensex (up 7 per cent) and the BSE Smallcap index (up 13 per cent) on a year-to-date basis till July 3.
Market watchers believe the revival of the foreign institutional investor (FII) flows coupled with robust economic growth compared with other emerging markets, strong earnings outlook, robust demand across sectors, the banking sector’s much better shape and positive expectations in the private capex cycle have supported sentiment.
Shares of mid-cap banks have advanced the most. With a gain of 156 per cent, UCO Bank has gained the most from its 52-week low of Rs 10.97 apiece, touched on July 15, 2022. Shares of the lender traded at Rs 28.10 on July 3, 2023.
IDFC First Bank is next on the list. The bank’s shares have rallied 151 per cent to Rs 81.94 on July 3 from its 52-week low of Rs 32.60, touched on July 4 last year. Union Bank of India and Indian Bank have also gained more than 100 per cent against their respective 52-week low levels.
In a recent development, the boards of IDFC First Bank and IDFC Limited on Monday approved their merger. The share exchange ratio for the amalgamation of IDFC Limited with IDFC First Bank shall be 155 equity shares of a face value of Rs 10 of IDFC First Bank for every 100 equity shares of a face value of Rs 10 of IDFC Limited.
Data further highlighted that KPIT Technologies, Aditya Birla Capital, Power Finance Corporation, Apollo Tyres, CG Power and Industrial Solutions and L&T Finance Holdings have also advanced more than 100 per cent from their respective 12-month lows. Market watchers are bullish on a couple of firms in the list despite the recent outperformance.
Brokerage Elara Capital is positive on Apollo Tyres, and has a target price of Rs 425.
“Apollo Tyres will now focus more on profitability and premiumisation over market share, which is evident from price hikes taken, which is higher than the industry. EU EBIT margin is improving despite challenging macro headwinds due to a favourable product mix post-restructuring and pricing action. We expect a standalone EBITDA margin of 14.3 per cent in FY24E and 14.6 per cent in FY25E on operating leverage and raw material cost stabilization. We expect EBITDA/tonne to improve from Rs 33,800 in FY23 to Rs 41,900 by FY25E. Moderation in capex in the upcoming years is a key positive,” Elara Capital said in a report.
Bharat Heavy Electricals, Max Healthcare Institute, Mahindra & Mahindra Financial Services, PB Fintech, One97 Communications, Jindal Steel & Power, IDBI Bank, REC, Tube Investments of India, Cummins India, Punjab National Bank, Supreme Industries, Aurobindo Pharma and Central Bank of India also jumped somewhere between 77 per cent and 100 per cent against their respective 52-week lows.
Motilal Oswal Financial Services has set a target price of Rs 1,050 for One97 Communications (Paytm), indicating an upside of nearly 25 per cent from the current price.
“The profitability of Paytm’s core payment business is further enhanced by its financial services division, which benefits from inherently higher contribution margin. The mix of financial services revenue has increased to 19 per cent in FY23 from only 4 per cent in FY19. With faster growth in GMV, merchant acquisition and cross-sell rate, we estimate Paytm’s financial revenue to record 75 per cent CAGR over FY23-25 with the mix reaching around 32 per cent by FY25,” the brokerage said.
Motilal Oswal has also set a target price of Rs 720 for Jindal Steel and Power. Shares of the company traded at Rs 607 intraday on July 4. “JSPL is all set to capture rising domestic steel demand amid the rapid expansion in infrastructure, railways, housing and construction. We believe JSPL is adding capacity at the right time to capture the robust growth opportunity,” the brokerage said.
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