Dalal Street has been buzzing with analysts claiming that the time has now come to own midcap stocks after years of underperformance when compared to the large-cap equities. “The midcap index has resolved out of bear phase as it logged a resolute breakout from the three years falling trend line, indicating resumption of a major up trend,” said brokerage and research firm ICICI Direct. Aided by the view that broader markets are likely to outperform the benchmarks, analysts at ICICI Direct have chalked out how they would build a midcap momentum portfolio for the medium term to extract maximum returns from this bullish outlook for the broader markets.
“Within midcap space, we have spotted the consumer discretionary sector based on its higher relative strength ranking, where we can capture higher beta,” the brokerage firm said. The highest weightage in the portfolio has been allocated to Voltas with a weight of 26.1% or 4 equity shares. Currently, the stock trades at Rs 909 per share after surging 64% in the last six months.
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This is followed by 20.2% allocation to Crompton Greaves. This allocation translates to 7 equity shares of the firm. Stocks of Crompton Greaves have jumped 61% in the last six months and have more than doubled since the March 2020 sell-off and now trade at Rs 395 per share. ICICI Direct has further added V-Guard Industries to the portfolio with an 18.9% weight, translating to 12 equity shares. V-Guard has already surged 15% since the beginning of this year and in the last 6 months, it has gained more than 25%.
Symphony is another stock in the midcap momentum portfolio with a weight of 15.7%. Currently, the stock trades at Rs 1,097 per share, after having surged more than 33% since the beginning of December last year. The final addition to the midcap portfolio is Bajaj Electricals with a 19.2% allocation, translating to roughly 4 stocks of the firm. The stock trades at Rs 707 per share, having jumped 79% in the last six months.
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According to ICICI Direct, the investment allocation towards this portfolio should be around Rs 13,363, benchmarked against Nifty 500 index. The brokerage firm has categorised this portfolio as a medium-term high-risk portfolio. Potential returns range between 8% to 15%.