MidCap Multibagger Stock Ideas In India: Do They Mostly Work?

The problem with multi-bagger share ideas is that more often than not, you need to get the timing of the market right, or else you could end-up with huge losses.

If you do a random search on the internet you would find so many brokerages, giving out so many ideas on midcap stocks, that you would often get confused.

A leading brokerage recommended Sintex Industries, at a price of Rs 104 in Oct 2015. As we see today the price has collapsed and the stock is trading at a new 52-week low of Rs 69.

Marksans Pharma (down 42% in last 1 year), Eros International (Down more than 100 per cent last year) are some example of how midcap multibagger ideas in India recommended by brokerages that has just not worked.

Some other stocks recommended by leading brokerages in the last few months were NCC, UPL, Cummins India. All of these stocks are trading significantly lower than levels when they were recommended by brokerages.

In fact, if you do not time the markets correctly, chances are that you could see significant erosion in the portfolio if you chase multibagger midcap ideas, unless these companies are able to generate tremendous amount of growth, which markets are not able to see.

The reason for this is that the midcap index and the small cap index tend to fall faster than the benchmark Sensex and the Nifty.

From Jan 1, until Jan 18, the smallcap index has fallen a huge 13 per cent, while midcap index has dropped 11 per cent, against a fall of around 7 per cent for the Sensex and the Nifty.

The Sensex is down almost 18 per cent, from the peak levels seen in March 2015, while most midcap stocks are down anywhere between 40-120 per cent.

Stick to midcaps that have strong fundamentals

Many midcap stocks have over the years given manifold returns to investors. However, these have generated returns over many years. If you are just chasing momentum, chances are you could end-up making losses.

So, midcap multibagger stock ideas in India could be fraught with risk. It is extremely important to discern carefully and study the fundamentals of the company before investing. After that you need to take a long term view of atleast 2-3 years, if you wish to make returns from these stocks, if you are convinced on the fundamentals.

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