Mid, small-caps shine; will their outperformance last?

This far in July, the mid-and small-caps have outperformed their larger peers amid volatility.
 
The S&P BSE Midcap index has gained around 5 per cent thus far in the current month, while the S&P BSE Small-cap index has surged around 4.5 per cent.
 
In comparison, the S&P BSE Sensex has moved up just 2 per cent during this period. The overall surge in markets, analysts said, is mostly on account of a fall in commodity prices, especially crude oil, offering some respite to the adverse macros.

Global bond yields, too, have moderated by 20-50 basis points from the recent highs and earnings estimates for the Nifty haven’t seen any worthwhile cuts. All this is supporting the market sentiment for now, said analysts at Motilal Oswal Securities.
 
“Valuations for the Nifty have moderated to 18.7 times FY23 EPS, in line with its long-period averages. The glass appears half-full to us, delicately balancing the headwinds with some silver linings,” according to Motilal Oswal Securities.
 
The dominant factor influencing markets, according to VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, is the sustained rise in the dollar that had gained momentum during the last one month.
 
“Dollar has appreciated 5 per cent since early June and 13 per cent so far in 2022. If this trend sustains, it is bad news for EMs.
But for now, it appears that this 'flight to dollar safety' is a bit overdone and due for some correction,” says VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

G Chokkalingam, founder and chief investment officer at Equinomics Research expects this choppy phase for the markets to continue for the next two-three months.
 
G Chokkalingam, Founder and Chief Investment Officer, Equinomics Research says influx of retail investors is keeping interest in mid, small-cap alive. Sharp correction in mid, small-caps have made them attractive, he says. Markets will remain choppy going ahead; US Fed action holds key. Remain cautious; allocate evenly between large, mid, small-caps. 
 
So, what should your shopping list in this segment look like?

While analysts at Motilal Oswal Securities remain bullish on these eight stocks from the mid, and small-cap universe that include Jubilant FoodWorks, Macrotech Developers, Lemon Tree and Ashok Leyland…

Here are some suggestions from Edelweiss Securities: Whirlpool, PVR, Blue Dart, Varun Beverages, PI Industries, Trent. 

On Wednesday, the sentiment will be impacted by inflation numbers released post market hours on Tuesday. Stock-specific action will continue as companies announce their Q1-FY23 numbers.