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2016-17 Midcap Segment To Showcase Promising Returns!
There is often a debate on the likely movement of stock indices in India. Many analysts are seen commenting that the Earnings growth of corporates is tepid or even negative.
They seem to have narrowed their approach to a few companies, since the overall momentum appears to be otherwise. At Vivekam, we wish to be unbiased and focus on hard numbers.
Trend in corporate performance often sets the tone for market sentiment. Vivekam undertook a study of corporate results for the latest concluded period ending in March 2016. As has been the practice of Vivekam, we focused on Trailing Twelve Months (TTM) performance vis-à-vis quarterly performance of all companies. We first selected those companies that have reported better results over earlier period. Then we put them in several buckets based on market capitalization to see what sizes of companies are doing better.
The table given below contains analysis of 1956 companies out of 3962 that have reported their FY16 results. PAT numbers shown in the table below are aggregates of all companies falling in respective categories. Companies with less than 1,000 crore market ...
... capitalization have done exceedingly well by reducing their losses by 88.78% in the latest TTM period. Companies within 1000 -2500 Cr and 2500-5000Cr Market Cap have recorded a rise of 120.99% and 37.01% in their aggregate profits. As we move down the list, increase in profits seemed to have lost momentum, with the exception of 20000 – 50000 category where the profits surged bucking the trend. It also shows that when midcap companies post better or improved performance from the past Quarter the price of the stocks go up more significantly compared to the index than in large caps.
Snapshot of stocks with improved profits:
Mid cap Buckets Previous TTM Latest TTM Change Number of stocks
0-1000 Cr -17,405 1953 88.78% 1577
1000 – 2500 Cr 3,999 8,838 120.99% 135
2500 – 5000 Cr 8,087 11,080 37.01% 84
5000 – 10000 Cr 12,515 17,151 37.05% 58
10000 – 20000 Cr 26,105 29,424 12.71% 42
20000 – 50000 Cr 26,413 35,930 36.03% 32
50000 Cr above 169,854 184,730 8.76% 28
We also made an effort to see the ratio between stocks improving profits Vs stocks reporting lower profits. From the table below, one can infer that majority of stocks are improving their bottom lines regardless of the size of the company in market place. This augurs well for the sentiment, unless the trend reverses with more companies announcing results. For now, it looks the foundation being laid is stronger and shall support rising indices. We will keep updating these tables on daily basis. Retail investors are welcome to visit our site frequently to get a view of the latest position.
Comparative position of stocks:
Mid cap Buckets Results declared Better Poor Ratio
0-1000 Cr 3374 1577 1797 47 : 53
1000 – 2500 Cr 194 135 59 70 : 30
2500 – 5000 Cr 139 84 55 60 : 40
5000 – 10000 Cr 95 58 37 61 : 39
10000 – 20000 Cr 64 42 22 66 : 34
20000 – 50000 Cr 56 32 24 57 : 43
50000 Cr above 40 28 12 70 : 30
Based on our study we believe the following to be true.
• ✓ Profits of several companies are expanding.
• ✓ Profitability of midcap stocks seems to rise more than large cap stocks.
• ✓ There will be opportunities for profitable investing by backing the stocks reporting improved results.
• ✓ Investing in large cap stocks may not yield higher returns.
• ✓ Mutual fund investors should consider moving out of Large Cap funds and consider mid cap funds or small cap funds for accelerated growth in NAV.
• ✓ One must be selective in choosing stocks / funds for their investments.
• ✓ Expanding bottom lines should help improve the overall sentiment and attract more and more money into financial assets.
• ✓ Failing to invest now may result in lost opportunities in short term.
We strongly advise those looking out for investment avenues to start a disciplined Investing plan with some expert assistance to help manage your investments and meet your desired goals.
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