Mid-cap stocks are again growing in popularity among overseas investors after five years of decline, according to Goldman Sachs.
“We are seeing a sharp reversal” in foreigners’ ownership of India midcaps, strategists including Amorita Goel and Sunil Koul wrote in a note Wednesday, citing their analysis of second quarter shareholding data.
Overseas investor holding in midcaps has increased by 175 basis points to 16 per cent of their market capitalisation this year, compared with a drop of 250 basis points over the last five years, they added.
Global money’s return to smaller and riskier Indian stocks shows their confidence in India’s stock market despite concerns on valuation premium. The smaller stocks are attracting overseas buyers even as they remain more expensive than the large ones.
The S&P BSE MidCap Index has risen more than 20 per cent this year, surpassing a 7.4 per cent gain in equity benchmark.
It is trading at 24 times on earnings-based valuation versus 19 times for the Sensex index, according to data compiled by Bloomberg.
India’s equity market has received about $15.5 billion in net foreign inflow this year, just about $1.5 billion shy of erasing last year’s record outflow, according to data compiled by Bloomberg.
That support has helped drive the Sensex up 14 per cent from a March low, versus little change in a gauge of emerging market shares due to a selloff in Chinese risk assets.
First Published: Aug 17 2023 | 10:09 PM IST