BSE are trading at or near their 52-week highs

• tanvi_singh
• March 20, 2010

Around 1,800 companies on the Bombay Stock Exchange (BSE) are trading at or near their 52-week highs, as fund managers and investors bet on the next multi-bagger stocks. Large-cap stocks have been moving in a narrow range for nearly six months, prompting weary investors to look to mid-, and small-cap shares for better returns even if the risks are higher.

“The market still looks good; foreign institutional investors (FIIs) are giving Indian equities a higher-risk premium than China after many years,” said Bharat Shah, head-institutional sales, Ventura Securities, adding, “Even though the market is slightly expensive compared to its historical average, we will see investments chasing Indian companies because of their growth potential.”

Market watchers are hopeful about the prospects of mid-, and small-sized companies, as many have been able to raise capital to fix their strained balance sheets.

“There is plenty of cash available with domestic fund managers and most of them continue to deploy them in the same set of stocks where they are already invested,” the head of dealing at a domestic institutional brokerage house,” adding, “While the fund manager understands that the company, he is also helping the price sustain at current levels even if they don’t rise significantly.”

The benchmark 50-share Nifty and 30-share Sensex have risen 88% and 95%, respectively, over the past one year. In comparison, the BSE Midcap and the CNX Midcap indices have gained 145% and 132%, respectively, during the same period.

“Stocks that show a steady appreciation provide the much-needed alpha for portfolios,” said Manish Sonthalia, senior vice-president Fund Manager, Motilal Oswal Securities, which is bullish on companies in the consumer space.

Experts feel that there are still a good number of stocks available at reasonable valuations. But investors will have to do their homework before buying the stocks. Brokers say investors should look out for dividend yield and recent earnings when investing in mid-cap stocks.

Companies with wide variation in quarterly earnings, and those with balance sheet problems should be avoided even if the shares have been rising of late.

Brokers are bullish on large PSUs, banking and frontline companies. Even if sentiment remains positive, the rally is expected to narrow down to select stocks in the next few days.

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• Last Modified: March 20, 2010
• Filed Under: Latest News, MARKETS, NATION, WORLD