Mid & smallcap stocks beat largecaps in September quarter. Time to book profits now?

Shares of several midcap and smallcap companies registered sharp gains in the September quarter and even outperformed their largecap peers, on the back of strong buying, particularly by domestic institutional and retail investors.

The S&P BSE Midcap and Smallcap indices rallied about 15% in July-September, outperforming the S&P BSE Sensex which gained 8% in the same period.

The prominent gainers in the smallcap space included Mazagon Dock Shipbuilders, Power Mech Projects, Transformers & Rectifiers (India), TGV SRACC and Vinyl Chemicals India. These five stocks more than doubled in value in the September quarter.

While Power Mech Projects hit a record high of Rs 1,919.9 last month, the northward move in shares of Mazagon Dock Shipbuilders continued as they scaled fresh record high of Rs 525 on Monday.

The resilience shown by Indian equities to withstand global shocks does put them on a better foot, but analysts are of the view that profits should be booked in the midcap and smallcap space now.

According to Vaishali Parekh, Vice President - Technical Research at Prabhudas Lilladher, investors should book profits in stocks that have seen a sharp rally and await a clear market direction to resume buying.

Parekh recommends investors to take profits in Mazagon Dock, but the stock is a buy-on-dip candidate for her as its long-term trend remains bullish.

In the midcap space, banks led the gainers’ list as recovery in economic activity, pick-up in credit growth, and improvement in asset quality bolstered the outlook for the pack.

Stocks like Union Bank of India, Federal Bank, IDBI Bank and IDFC First Bank have risen more than 30-58% in the September quarter.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)