SpiceJet, Hexaware Tech among Five Wealth-Creating Midcap Stock Ideas

The S&P BSE Midcap index may have lost nearly 3 per cent in the last one week, it has returned over 22 per cent in the last one year, as compared to just about 10 per cent surge on the benchmark index Sensex.

While some analysts believe the valuations of midcap stocks are overstretched, there are some who are bullish on these stocks given one chooses the right ones.

“Most of the mid cap stocks are looking overvalued but if one has 2-3 years long horizon, one can expect good returns. There are still pockets of midcap space which are at attractive valuation (like specialized engineering companies, niche financing and infrastructure companies) and they are expected to outperform in short term in spite of majority of midcap stocks being overvalued,” said Aasif Hirani – Director, Tradebulls.

Below are five midcap stocks ideas recommend by top brokerages:

India Nivesh

1) L&T Finance Holdings

L&T Fin has delivered better performance in the June quarter despite challenging business environment with healthy loan growth (despite run down of de-focused portfolio), healthy operating profit led by cost saving and positive surprise on asset quality despite transition to 120 dpd.

The brokerage like company’s strategy for FY16-20E of improving ROEs to high teen which will be led by focus on profitable and high margin segments.

India Nivesh maintained ‘buy’ rating on the stock with a target price of Rs 115.

Prabhudas Liladhar

2) Hexaware Technologies

Hexaware Technologies reported impressive 6.6 per cent quarter-on-quarter dollar revenue growth. The company has guided for a robust second half as well with even fourth quarter of calendar year 2016 to be a good quarter unlike Q4 of CY15 which was soft.

The brokerage believes Hexaware’s performance is particularly heartening against a backdrop of revenue/margin miss by most mid?cap peers. It retained ‘Accumulate’ rating on the stock with a target price of Rs 255.