What's ahead for largecaps and midcaps?

The market has been quite volatile in the past week and has swung from one direction to another. Same is the case with largecap and midcap stocks. But what lies ahead for these two spaces and which one is likely to overtake the other?

The markets are not displaying much strength in trade today as well. As investors get anxious about their holdings in the stock markets, experts give a status check on the largecap and midcap space and reveal what lies ahead for them.

If we look at last week's statistics, the Sensex was down 3.3% and swung almost 10.3% or 1039 points in intra-week trade last week. The CNX Midcap index was down 4.3% and swung 11.3% in intra-week trade. The biggest midcap gainers were Adani Exports up 19%; Ipca Labs, and Satnam Overseas, which was up 6%.

Some experts believe that if the market is genuinely stabilizing and is pulling back then some amount of action should come back to the midcaps, because the largecap rally might happen periodically when stocks get oversold as one saw on Friday.

Institutional money will probably get into largecaps and pickup Maruti Udyog and Tata Motors at very low levels and there will be short covering on the largecaps on the F&O side, because the market tends to be a bit short right now.

Experts feel that when value buying emerges in midcaps, that is when there will be stability in the markets, and they will be out of the woods.

largecaps have to move up first and then midcaps will follow suit.

There are a large amount of position built up on the premise that eventually FIIs will come and buy at a higher price. The trigger for the midcap rally, but that trigger is missing right now. We still believe that the frontliners have to move up first before the midcaps catch on.

The valuations of largecap stocks are so irresistible that one would not want to risk new capital into the midcap stocks. "One would rather want to buy a Bharti, Cipla, Hindalco, Reliance, HDFC etc. There are enough cheap stocks or comparatively cheap than to risk capital into midcaps," says Srivastava.

This is definitely the time to buy into the markets.

Technical analyst, Ashwani Gujral also believes that largecaps have to stabilise first. He says, "Right now there is no point in looking at the mdicaps till the largecaps stabilise at higher levels."
For the moment, most believe that largecaps will outperform the midcaps because institutional buying will come into Index stocks.

Reliance could be one big pick, but I would rather go and pick L&T and BHEL today. These look good because they are the best plays in terms of valuations, visibility and earnings quotient today. With the commodity prices going down they have a substantial build up in the operating margin, It would rather tend to trade on these two stocks which have a good earning visibility, than a pure commodity play.