The Multibagger Midcap Stocks of 2021. And the Secret Behind their Big Gains

In 2021, Indian stock markets outperformed global counterparts as they scaled new records.

During the year, work-from-home, inflation, new strains of Covid-19, vaccination coverage, the US Fed's timeline for tapering monetary stimulus, flurry of IPOs, and retail investors, shaped the equity markets.

Besides, government policies and spending, market liquidity, lower FD rates causing investors to park excess funds in the markets, strong balance sheets of companies with a focus on R&D, massive capex by companies, and shifting sentiment towards India as a global hub, were all factors that contributed to the multibagger returns.

In nominal terms, 2021 was the greatest year for the BSE, with the Sensex rising almost 10,000 points in a single year. This is the highest year on year (YoY) increase in absolute terms historically.

Mostly, the rally was aided by smallcap and midcap stocks.

The BSE Small-Cap Index surged over 61%. On the other hand, the BSE Mid-Cap index rallied over 38% in the last one year.

Here are the top gainers over the period of one year from the BSE Mid-Cap index.

#1 JSW Energy (342%)

In the midcap space, JSW Energy tops the list when it comes to delivering multibagger returns to its shareholders.

Shares of this power generation company have returned 342% in the last one year. The stock hit its 52-week high of Rs 408.7 on 13 October 2021.

JSW Energy is gaining momentum among market players as a result of its transition toward renewable energy.

In a very recent development, JSW Energy approved the re-organisation of the company's green (renewable) and grey (thermal) businesses.

As a result of this re-organisation, all present and future renewable energy operations will be housed under JSW Energy Neo, a wholly owned subsidiary of the firm.

The new company will drive growth plans in renewable energy across generation, energy storage, and green hydrogen.

The move will aid the firm in building and streamlining its renewable portfolio, as well as establishing an effective holding structure for raising funds and generating value.

Moreover, the company has laid out a growth plan to reach 20 GW of power generation capacity by 2030, with about 85% of this capacity via renewable energy.

Recently, Life Insurance Corporation of India (LIC) acquired more than 2% stake in the company via open market transactions, increasing shareholding to 9.01% from 7% earlier.

To know more, check out JSW Energy's latest shareholding pattern.

#2 Tata Power (195.2%)

Another power company that has left many investors stunned with its spectacular performance is Tata Power.

Shares of Tata Power have surged from Rs 75 to Rs 269.7 mark in the last 12 months - yielding around 195.2% in this period.

However, the multibagger stock has been under profit-booking pressure after making this year's closing high of Rs 257.3 on 18 October 2021.

The stock has been on a roll recently due to various orders and transactions taking place in the electric vehicle (EV) charging stations segment.

Back in October 2021, Tata Power entered into a strategic partnership with Tata Motors and TVS Motor to develop EV charging infrastructure across India.

Besides this, the company is also acing the clean energy race. Presently, Tata Power is the country's largest renewable power company with renewable power capacity of 2.6 gigawatt (GW) in 11 states.

The company plans to take its renewable production to massive 15 GW by 2025.

Recent orders and deals bagged by Tata Power in the solar power segment have also pumped up the stock.

Future development will be predominantly driven by clean energy initiatives such as renewable energy and power distribution, which may help boost the company's environmental, social and corporate governance (ESG) score.

Aside from that, investing in new green technology might help boost growth.

#3 IRCTC (194.4%)

In 2021, the stock of Indian Railway Catering and Tourism Corporation (IRCTC) turned ex-split after the company had fixed 29 October 2021 as the record day for the stock split in the ratio of 1:5.

Before the stock split, the stock hit an all-time high of Rs 6,393 on 19 October 2021.

Currently, shares of state-owned IRCTC is hovering over Rs 845 per share. In the past one year, the company's share price has surged over 194.4%.

IRCTC is in a monopoly with a dominant position in online rail bookings and packaged drinking water with around 73% and 45% market share.

Moreover, the company's growth levers are well in place across segments like internet ticketing, catering, and hospitality.

The internet ticketing segment which contributes around 53% of revenue is likely to increase in the upcoming quarters on the back of unlocking of economy.

However, the new variant of Covid-19 'Omicron' could impact IRCTC's operational revenue.

That apart, IRCTC is aggressively focusing on its hospitality business. It's making fresh tie-ups with hotels, tour and travel service providers and local food suppliers. The state-owned firm is also giving special focus to its food chain business in running trains. Aside from that, the IRCTC has formed alliances with aviation firms.

As a result, the market has realised it would no longer be an Indian Railways' e-ticket booking platform in the future. It will become a one-stop shop for hospitality services.

#4 Mindtree (192.2%)

Larsen & Toubro (L&T) owned company, Mindtree is among the top emerging IT service stock in the market.

Mindtree has been an outperformer in the IT space as the scrip has given multibagger returns last year.

From about Rs 1,650 per share in February to its current price of Rs 4,842, the multibagger stock has gained more than 190% in the past year.

The stock's bull run has been fuelled by strong fundamentals.

Mindtree reported a net profit of Rs 4 bn for the quarter ended 30 September 2021, up 57.2%. The company's revenue was up 34.3% to Rs 25.9 bn, which was highest YoY growth for a quarter in a decade.

Over last six quarters, the company has consistently declared positive results.

Meanwhile, the company has maintained earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin at 20.5% while making aggressive investments in further expanding their domain, digital, and leadership capabilities, geographic footprint, and hyperscale partnerships.

Also, the pandemic turned out to be a boon in disguise for the IT industry, as it sparked a need for digital transformation across the board. 'Digital or die' has become the mantra for companies all across the world.

L&T is the promoter/holding company of Mindtree with a 61% stake in the Bengaluru-based company.

To know more, check out Mindtree's latest shareholding pattern.

#5 Mphasis (121%)

Another IT company to join the pack is Mphasis. Shares of this IT consulting and software have more than doubled investors' money in 2021.

The Bangalore based firm has gained 121% in the last one year, while its share price is up 17% in the last one month. The share price of Mphasis has grown almost 7 times in the last five years from around Rs 550 in December 2016 to around Rs 3,350 in December 2021.

New tie-ups and acquisition across different verticals is helping the company to reach new heights. Two weeks back, the company informed exchanges that it has set up a joint entity, Mrald, with London-headquartered insurance giant Ardonagh Group to augment digital technologies for the insurance intermediary sector.

Mphasis acquired 51% stake in Mrald, a company incorporated in England and Wales. As per the management, Mphasis is uniquely positioned to take advantage of the high potential insurance Intermediary market.

Mphasis a global IT solutions provider specialising in providing cloud and cognitive services, applies next-generation technology to help enterprises transform businesses globally.

What's the secret sauce to identify such multibagger stocks?

One factor that all the above stocks have in common is the potential to grow big in their respective domain.

No one can stop a firm from making significant gains if it has a clear vision of its business and the confidence to push its operational activities to the next level.

However, finding multibagger stocks is not an easy task for everyone.

As an investor, we need to understand that such stupendous returns don't happen overnight. The transition from a smallcap to a midcap and finally becoming a largecap share would demand patience and perseverance.

Before investing in any stock, one should keep track of all the financial statements, product developments, news and announcements related to it.

One should also select a company with a lower or minimum debt level. The debt-free status help company to do business expansion and acquisition of new businesses. Cash on hand gives freedom to fight against any adverse business situation.

To help you find the right investment opportunity for the year 2022, Aditya Vora, Research Analyst at Equitymaster, shared how to use the emerging trends in spotting multibagger stocks, in a video.

Here are Links to Some Very Insightful Equitymaster Articles on Multibaggers:

• This New Year, Don't Go After Multibaggers. Let them Come to You
• These 5 Newly Listed Companies Turned into Multibaggers
• Put the Odds in Your Favour to Find Smallcap Multibaggers
• My Low Risk Strategy for Finding Multibaggers
• A 'Zero to One' Approach for Multibagger Returns
• How to Identify Multibagger Stocks

 

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...