• By Vaamanaa Sethi
  • Tue, 05 Sep 2023 02:19 PM (IST)
  • Source:JND
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The Nifty MidCap 100 index has crossed the 40,000 mark for the first time, while the Nifty SmallCap index reached an all-time high of 12,701.05, on September 5, led by strong bullish momentum in midcap stocks. This happened despite experts and analysts raised concerns about higher valuation.

Out of 15 sessions, Nifty MidCap 100 index gained in 13 sessions, whereas, SmallCap index was in green in 12 sessions. The indices jumped over 6% and 8.4% during this period and advanced 27% and 30% so far this year.

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Some analysts suggest that the rally in MidCap and SmallCap stocks are likely to continue as investors are now focusing on fundamentally strong stocks that faced setbacks recently.

Rahul Arora, CEO of Nirmal Bang Equities, as quoted by Moneycontrol, points out that the market is grappling with a dearth of appealing investment prospects. Numerous promising stocks have already been acquired and are now scarce at more affordable price levels. 

Hence, investors are crafting stories for stocks they wouldn't generally consider. This is leading to previously overlooked stocks suddenly becoming expensive.

Whereas, Nilesh Shah, Managing Director of Kotak Mahindra AMC, warns investors to tread with caution in the small-cap and mid-cap space, stating that "there have been a lot of frothy valuations built up."

Shah further said that although large-cap stocks are currently trading close to their historical valuations, this situation is expected to be justified as the economy continues to expand, and earnings upgrades become a reality.

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Kotak Institutional Equities has recently acknowledged the widespread surge in market activity, yet it maintains a sense of uncertainty regarding the underlying factors propelling this rally and the varying performance trends observed across different sectors.

“This is particularly puzzling, considering the ongoing weak domestic demand in the consumption sector and the diminishing global demand for IT services,” the report said.