BSE MidCap and SmallCap hit fresh record highs, gain up to 38% in CY23 so far

The ongoing surge in mid and small-cap stocks appears to be retaining investor's attention, even as these stocks reach record levels. This year, the mid and small-cap stocks have outperformed the large-cap counters by a wide margin.

The Indian domestic benchmark indices Nifty 50 and S&P BSE Sensex have gained 9% and 8%, respectively, this year so far, while the BSE MidCap index and BSE SmallCap index have surged by 32.27% and 37.70%, respectively, during the same period.

In today's trading session, the BSE MidCap and BSE SmallCap indices have registered new record highs of 33,526 points and 39,855 points, respectively, and this month so far, they both have surged by nearly 8% each.

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Mid and small-cap stocks are seen benefiting more from the ongoing recovery in India’s capital expenditure. Defence stocks in particular have witnessed a remarkable surge in their stock prices, propelled by robust order wins, increased budget allocations, and the government's focus on curbing defence imports and encouraging domestic procurement.

Railway-related stocks have also been on an upward trajectory, primarily fueled by strong order wins, driven by the ongoing modernisation of the railway sector. In addition, renewable energy stocks have also experienced a substantial surge, fueled by India's ambitious energy transition goals, aiming for 500 GW of non-fossil-based electricity capacity by 2030.

Also Read: Smallcap, midcap indices up over 30% so far in 2023, nearly 100 stocks in green; What's fueling the rally?

Skyrocketing returns

Among individual stocks in the BSE MidCap index, REC, Power Finance Corporation, IRFC, and UCO Bank shares have delivered returns between 150% and 250% over the last one-year period. Notably, IRFC achieved a market capitalisation of over ₹1 lakh crore on September 11 as its stock price reached an all-time high of ₹92.35 per share.

Shares of PB Fintech, the parent company of PolicyBazaar and PaisaBazaar, bounced back strongly this year after a poor show in 2022, when the stock lost 52.83%. In the current year so far, the stock spiked from ₹451 apiece to ₹825 apiece, translating into a gain of 83%.

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Other notable performers include Aurobindo Pharma, SJVN, Polycab India, Bharat Heavy Electricals, Indian Overseas Bank, Linde India, Solar Industries India, General Insurance Corporation, Trent, Supreme Industries, Glenmark Pharmaceuticals, Vodafone Idea, L&T Finance Holdings, Macrotech Developers, Persistent Systems, Torrent Power, Lupin, Godrej Industries, The New India Assurance Company, and Nippon Life India Asset Management, which have all yielded returns between 60% and 115% over the last one-year period.

Impressively, 175 BSE small-cap stocks have delivered returns of over 100% in the last one-year period, with Jai Balaji Industries standing at the top of this line-up, delivering a return of 1350%.

Jai Balaji Industries primarily operates in the steel sector. The company is engaged in the production of a wide range of steel products, including pig iron, sponge iron, ferro alloys, steel billets, and TMT bars (Thermo Mechanically Treated bars).

Over the last four months, starting from July to October, the stock finished each month delivering fabulous returns of 106.51%, 72.25%, 61.38%, and 25%, respectively.

Also Read: Midcaps, smallcaps too hot; investors should have a large-cap tilt right now, says Varun Fatehpuria of Daulat Finvest

Meanwhile, some analysts are suggesting that the small-cap space is at risk of a correction after the steep rise over the last few months.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.