Midcaps, Small-Cap Stocks Hit New 52-Week Lows; Tatas, Yes Bank, HPCL, Concor, BEML In List; Which To Buy?

Amidst the volatile stock market on Monday, mid-cap and small-cap indices dropped by around 2% to 3%. Nifty Midcap 100 and Nifty Smallcap 100 indexes touched an intraday low of 46,865.70 and 14,299.80. A similar case was with BSE Midcap and Smallcap indices. They were the biggest draggers of the stock market on March 3. A host of midcaps and small-caps including BEML, HPCL, Tata Chemicals, Tata Tech, Yes Bank, ZEEL, and Tanla Platforms touched new lows. The broader outlook for midcaps and small-caps remains uncertain due to fragile global conditions.

Midcap, Smallcap Indices:

Nifty Midcap 100 index dropped by 1,049.5 points or 2.2% on March 3, while Nifty Smallcap 100 index plunged by 400.4 points or 2.7%. Furthermore, in a single day, BSE Midcap and Smallcap indexes have nosedived by 2% and 3.2% respectively.

Stocks that hit a new 52-week low on Monday are:

Midcaps: Apollo Tyre shares touched a new 1-year low of Rs 370.90, while Supreme Ind hit a new low of Rs 3,284.45, Tata Chemicals hit a new low of Rs 756, KPIT Tech hit a new low of Rs 1,142.30, PI Industries hit new low of Rs 2,951.10, IRB at new low of Rs 41.04, Concor at new low of Rs 601.25, Tata Communications touched low of Rs 1,317, Yes Bank at new low of Rs 16.13, Tata Tech also hit new low of Rs 634.55, Colgate Palmolive at new low of Rs 2,379.20, SJVN hit new low of Rs 80.54, Poonawalla Fincorp at new low of Rs 268.10, Bank of Maharashtra hit new low of Rs 43.67, and Indian Overseas Bank hit new low of Rs 98.92, MRPL at a new low of Rs 98.92, and HPCL touched a new low of Rs 287.55.

Smallcaps: HFCL hits new low of Rs 77.23, Great Eastern Shipping at new low of Rs 800.30, NCC at new low of Rs 170.05, Happiest Minds hit new low of Rs 364.15, JBM Auto hit new low of Rs 491.45, Signature India hit new low of Rs 1,025.50, Jyothy Lab hit new low of Rs 314.80, BEML hit new low of Rs 2,350, Birlasoft at new low of Rs 410.10, ZEEL hit new low of Rs 89.57, Finolex Cables hit new low of Rs 789, Ola Electrics hit new low of Rs 1,008.30, GMDC at new low of Rs 226.59, RailTel hit new low of Rs 265.50, IRCON hit new low of Rs 134.24, Trident hit new low of Rs 24.63, Raymond at new low of Rs 1,241.10, Cyient at new low of Rs 1,213.20, Swan Energy at new low of Rs 385.80, NMDC Steel at new low of Rs 33.40, Tanla Platforms at new low of Rs 409.35, Intellect at new low of Rs 633.70, Titagarh Rail at new low of Rs 665.05, Apar Ind at new low of Rs 5,476.40, IIFL at new low of Rs 281.50, KEC International at new low of Rs 648.60, JWL at new low of Rs 270.05, RITES at new low of Rs 192.40, Central Bank at new low of Rs 41.53, KPIL at new low of Rs 830.00, UCO Bank at new low of Rs 34.01, Data Patterns at new low of Rs 1,351.15, Tata Teleservices at new low of Rs 54, Sterling & Wilson at new low of Rs 231.40, and Angel One at new low of Rs 1,952.25.

Worst And Best Performing Stocks In 1 Month:

In the past 1 month, the worst performing mid-cap stocks were RVNL down by 30%, followed by HUDCO share which plunged over 28%, while stocks like IRB, FACT and Bharat Dynamics dropped by 24.5% to 25.5%. Also, Delhivery stock was down over 22%, Mphasis toppled by over 21%, and Concor slipped by over 20%.

In the case of small caps, NATCO Pharma plunged above 34%, Sonata Software dropped by nearly 32%, NBCC shed over 27%, NCC declined by nearly 31%, JBM Auto plummeted by nearly 36%, Tejas Network tumbled by over 22.4%, Birlasoft down 21%, IFCI fell 27%, while BEML and IRCON plunged by 36% each. Also, BLS is down by 22.3%, GMDC down 25%, Ola Electric down 27%, Apar Ind down 23%, RAILTEL down 31%, Tanla down 21%, HBL Engine down 27%, GSPL down 215, Data Patterns slipped by 35%, GRSE shed 23%, RITES lower by 22%, JWL down 28%, and Sterling and Wilson Renewable Energy shares down 23%.

Outlook Ahead:

As per Kotak Institutional Equities, the continued weakness in broader markets has resulted in continued downgrades in consensus earnings for small caps compared to large caps in 3QFY25. Post the 3QFY25 changes, mid-cap. companies have seen 11%/9% cut in their FY2025/26 estimates, while small-cap companies in the BSE-500 universe have seen 25%/17% cuts in FY2025/26 estimates in 11MFY25. Meanwhile, large-cap. Stocks have seen minor cuts over the same period. Our analysis of sectoral aggregates suggests that the downward revisions have been broad-based."

Furthermore, the Tata Mutual Fund report highlighted that the Q3FY25 results for mid and small-cap companies have seen more downgrades compared to large-cap v/s the previous quarter as the majority of the companies were facing either top-line or margin pressures. Also, on the valuation front, mid and small caps are still running at a premium of 57% and 30% respectively v/s large caps.

Thereby, the Tata Mutual Fund report mentioned that the risk-reward seems more skewed towards large caps. Amid selling by FIIs, DII flows are more inclined towards large caps vs mid and small caps.

Midcap Short-Term Challenges:

As per Axis Securities, most of the companies in our Midcaps coverage primarily cater to industrial customers and are influenced by demand trends in the industries they serve. Q3FY25 performance and management commentary indicate that demand is picking up in certain segments, while the broader outlook remains uncertain. Key factors to monitor going forward include shifts in private capex, domestic infrastructure spending, geopolitical developments affecting trade and logistics, and the imposition of Anti-Dumping Duties/Tariffs in the USA and other key markets.

Long Term Outlook: As per Axis, although some companies lowered their guidance for FY25, most remain confident in achieving their medium to long-term revenue and EBITDA targets. As highlighted earlier, the stocks in our coverage cater to both domestic and international industrial customers and stand to benefit from rising industrial activity. With increased infrastructure allocations and a strong push for domestic manufacturing, we expect midcap stocks in our coverage to perform well over the long term. Additionally, near-term export-related challenges are anticipated to subside over the next few quarters, leading to improved profitability and revenue growth for export-oriented companies.

Which Midcap Stocks To Buy?

1. Kirloskar Brothers: With sustained demand from key end markets and a robust order book, KBL remains on track to achieve double-digit revenue growth in FY25. The current order book provides strong revenue visibility, and order intake is expected to remain strong going forward. Additionally, the focus on cost optimisation and an improved product mix should support continued margin expansion. Axis Securities said, "We value the stock at 25x FY27E EPS with a target price of Rs 2,100/share and have a BUY rating on the stock."

2. Va Tech Wabag: VA Tech Wabag Ltd. (VTW) has consistently grown its order book while strategically enhancing its revenue quality and predictability, which aligns with this focus. The company is looking to increase its share of more profitable international, industrial, and O&M contracts. With its current order book providing clear revenue visibility for the next 3-4 years, especially in terms of international orders, these strategic efforts are expected to help the company achieve its targeted margins, further strengthening its financial position and business sustainability. It added, "We have a BUY Rating on the stock with a target price of Rs 1,970/share, valuing it at 21x FY27E EPS."