The Nifty Midcap 100 index was up 3.1% in July2021 as against a 0.3% rise for the Nifty, according to the "Bulls & Bears India Valuation Handbook", by Motilal Oswal Financial Services. Among the midcap stocks that were up in July included JSW Energy (+49 per cent), L&T Technology (+28 per cent), Manappuram Finance (+23 per cent), Coforge (+22%), and Mphasis (+22%) were the star midcap performers in July'21.
Midcap stocks that are cheap when compared to long-term averages
According to the "Bulls & Bears India Valuation Handbook" by Motilal Oswal Financial Services, there are many midcap stocks that are available at a discount to long-term averages, which automatically means that they are cheap.
|Current p/e||10-year average p/e||Discount|
|Bank of Baroda||8.3||12.9||-35%|
Now, just because these midcap stocks are available at a discount, does not mean they become great investment bets. For example, investors maybe unwilling to buy the shares, because of issues surrounding growth, promoter related issues, or some issues that are a hangover on the stock. Therefore, it is not advisable to simply jump into stocks looking at the valuations and discount and go ahead and buy.
Here below we tell you whether you should buy these stocks.
Should you buy the stocks of SAIL, SUN TV, Zee and BOB?
Now, let's take the case of SAIL. The stock has already had a solid run and is trading near 52-week highs. Metal prices have rallied and hence quarterly numbers of metal companies have been robust. Should the global economy slow, metal prices could fall and so would metal stocks.
Now as far as Zee Entertainment is concerned, the covid situation over the last 18 months or so has hit performance badly. Apart from this there have been issues in the past pertaining to the promoters pledged share to pay off debts in other group companies. SUN TV too has been hit by stiff competition and churning out solid growth rates looks difficult.
Bank of Baroda is a good midcap stock to buy
According to Motilal Oswal, earnings outlook is improving for government owned banks, led by a reduction in credit cost estimates, as most public sector banks have strengthened their provision coverage over the last couple of years.
Bank of Baroda is one stock that many analysts are optimistic on. Many analysts have set a higher price target on the stock. HDFC Securities said that the stock of Bank of Baroda inexpensive and valuation gives a comfort for long-term investment in a report recently.
"It is a play on the gradual recovery in the Indian economy. Any progress on the rollout of the proposed bad bank would be positive for large PSU banks like Bank of Baroda," Motilal Oswal has said.
Investing in stocks poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house, Motilal Oswal are not liable for any losses caused as a result of decisions based on the article. Investors should take care because the markets are at record highs, with the Nifty crossing the 16,000 points mark.