Most investors like to play safe by investing only in large caps, especially during volatile times such as these. But many good stocks to buy now can be found in the midcap and small cap space too, given the fact that they are available at good valuations post the recent corrections.
Stocks from small cap and midcap space had corrected significantly over the last 1.5 years. From a high of 21,719 on Jan 8th 2018, the Nifty Midcap 100 is currently trading at 16337.1 points. The Nifty Small cap 100 is currently trading at 5854.65 down 3711.2 points from a high of 9565.85 on 11th Jan 2018.
Market experts are of the view that this is the right time to look for good stocks to buy now in midcap stocks and small cap segment. The valuations in midcap stocks and small cap stocks have become attractive with one-year forward PE (price-to-earnings) ratios below historic averages and unlike the rally seen in large-caps, these segments have not rallied.
If you look at the past, stocks from midcap and small cap have given high returns.
Stocks from mid and small cap stocks are most likely to do well in a phase of economic recovery when interest rates are low and there are huge growth opportunities. India’s race towards becoming a USD 5 trillion economy over the next 5 years will unleash many opportunities which companies from mid and small cap segment can capitalize on.
The government has clearly mentioned in the budget 2019 that its focus will be on development of infrastructure and rural sector. This gives a valuable hint of stocks which can be considered as the good stocks to buy now.
Government’s primary focus is on rural development by improving roads and housing and is planning to allocate a budget of 25, 00,000 crores over the next 5 to 7 years. This is likely to immensely benefit companies specializing in rural financing, farm equipment’s, building materials making them good stocks to buy now.
Government’s secondary push would be infrastructure development. PM Modi has mentioned the same in his speeches and in the BJP manifesto and is expected to allocate over Rs 10, 00,000 crores for this purpose.
Given this immense opportunity many construction companies, cement and electric distribution operating in the engineering and capital goods sector can be considered as good stocks to buy now.