Key Ideas for India’s Mid-Cap Sector for 2025 By Investing.com
Investing.com – The outperformance of Indian mid- and small-caps over large-caps over the past two years has led to a valuation gap at all-time highs, pointing to a possible near-term correction, according to UBS.
The performance differences between the Nifty Midcap 100 and Nifty 50 indices have reached unprecedented levels, largely due to revaluations in FY 2023-24.
“Based on past cycles, we believe a SMID correction is long overdue,” the note said, drawing parallels to the correction in 2018-19.
Around 80% of the 20 SMID-heavy sectors that UBS tracks, including chemicals, home improvement and stock markets, are trading at or above their three-year average.
According to UBS, top-down value strategies are challenging in the current environment, but selective bottom-up ideas with strong fundamentals could still provide opportunities.
UBS expects significant growth Delhivery Ltd (NS:) Express and LTL operations supported by market share gains and margin improvements. The stock has a Buy rating and the target is Rs 525, implying an upside of 57%.
Indian Energy Exchange Ltd (NS:), which is rated Buy at Rs 260, implies an upside potential of 49%. With a 19% year-on-year increase in trading volume in FY2025 driven by real-time and green markets, UBS expects IEX to benefit from strong renewable energy commitment mechanisms and new product launches.
Rated Buy, Multi Commodity Exchange of India Ltd (NS:) with a target price of Rs 8,000 offers an upside potential of 35%. UBS noted potential growth through increased participation, new product offerings such as weekly options and power derivatives. Concerns about a sequential slowdown in growth are seen as overblown.
While Navin Fluorine International Ltd (NS:), also rated Buy, has a target of Rs 4,250, around 22% upside potential. The company’s capacity expansion in specialty fluorochemicals and improved margin prospects through backward integration are expected to drive revenue growth.
Ramkrishna Forgings Ltd (NS:) has an upside potential of 66%. UBS is bullish on RKFL’s earnings visibility from rail contracts and aluminum forging projects, despite concerns about a cyclical slowdown in the commercial vehicle market.
Shyam metalics and energy Ltd (NS:) also offers an upside potential of 53%. UBS cited diversification into battery aluminum foil and potential anti-dumping duties on Chinese imports as key drivers of the company’s growth.
