Perfect time to enter equity through Mid-cap stocks!!!!

I had recommended to book profits when loksabha elections (May-2019) results came out. I had mentioned 12000 is upper side for Nifty and support will come around 11000. As I expected, after election results Nifty made a High of 12104 and then came down to 10700 levels. Though Nifty started it’s sell off after elections results but Midcap and small cap stocks started its correction from February 2018 (Introduction of Capital gain tax).

Since last 2 years Midcap and Small cap indices have corrected more than 25%. Normally corrections in Indian stock markets are of 13 to 21 months, so most probably correction is over. On technical front, BSE Midcap index has given breakout of falling trend line since January 2018. Now it has started sustaining above that resistance line. In last 2 months Midcap index has outperformed Nifty and SENSEX. Normally Midcap and Small Cap indices start out performing in the Bull Run. So I recommend to increase exposure in Mid and Small cap Stocks.

Selecting Mid and Small cap stocks is difficult task. Ideally one should invest through Midcap mutual funds rather than directly investing in stocks. 

Following are good Midcap funds to invest.

·         Axis Midcap Fund

·         DSP Midcap Fund

·         Kotak Emerging Equity Fund

·         L&T Midcap Fund

·         HDFC Midcap Opportunities Fund

On fundamental front, data is still not that positive. But RBI and Govt have taken steps to boost the economy. It will start giving results in next 2-3 quarters.  This year Kharip crop got damaged due to extended monsoon but Rabi crop is very well due water availability. I am hoping that rural demand will increase in next 2-3 months after harvesting of Rabi crop. Right now external factors are more damaging sentiments. Market has corrected this month due to corona virus in China. I think this is blessing in disguise. China has become manufacturing hub for entire world. Now India has a chance to become second supplier to world. I hope more foreign companies will start manufacturing units in India.

To conclude, one should start investing in Midcap and Small cap stocks through Mutual fund route for next 3-4 years. (Low interest rates, low inflation and adequate liquidity)I don’t think we will get such opportunity every now and then. So don’t miss this opportunity of minting money.

Happy Investing!!!