Rally in Indian mid-caps can last, says Deutsche Bank

Deutsche Bank has said the rally in Indian mid-cap stocks, which have risen 30 per cent since August, compared with a 19 per cent rise in Bombay Stock Exchange benchmark index Sensex, can extend to catch up on significant underperformance it saw in last three years versus the large caps.

"Mid cap stocks tend to rally sharply when economic growth is expected to be at an inflection point. While the jury is still out on the pace of economic recovery, we believe that growth has bottomed, currency has stabilised and the twin deficits have shown a marked improvement," Deutsche Bank said in a report on Wednesday.

The bank flags Bharat Forge, Hindustan Petroleum Corp, Jain Irrigation Systems, LIC Housing Finance, Shree Cement, Shriram Transport Finance and YES Bank as its top mid-cap picks.

(Reuters)