Best Performing Mid-cap Stocks of 2022. And the Secret Behind their Big Gains

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  • May 4, 2022 - Best Performing Mid-cap Stocks of 2022. And the Secret Behind their Big Gains

Best Performing Mid-cap Stocks of 2022. And the Secret Behind their Big Gains

May 4, 2022

Best Performing Mid-cap Stocks of 2022. And the Secret Behind their Big Gains

In 2021, Indian markets outperformed global counterparts and scaled new records.

But 2022 has started on a weak note. Inflation, the US Fed's rate hikes, and the Russia-Ukraine war has spooked investors.

Markets are currently trading in uncharted territory and are likely to remain volatile in the near term.

But amid the ongoing volatility, several mid-cap stocks have delivered good returns since the start of this year. In this article, we look at 2022's best performing midcaps and what's driving their rally.

Let's get started...

#1 Adani Power

No surprises here. You probably thought of Adani Power when you opened this article.

While all Adani group stocks are on fire this year, the one which has stood out and gained the most is Adani Power.

Since the start of 2022, shares of Adani Power have zoomed a massive 181%.

chart

The primary reason behind Adani Power's rally is power demand.

The summer season has kicked in and many parts of the country have been experiencing heatwaves. Thus, drawing up domestic power consumption.

Power utilities like Adani Power benefit from the demand-supply mismatch as they sell only a portion of their total power generation on a merchant basis in the short-term market, thus fetching them better prices as demand rises.

The company's fourth quarter results might improve amid the increase in power demand.

Several Indian states are likely to see a power shortage in the coming weeks as power plants struggle to find optimum amounts of thermal coal amid rising summer demand. This will lead to higher import costs which will result in supply-demand mismatch.

To know more, check out Adani Power's latest quarterly results and its financial factsheet.

#2 Indian Hotels

Next on our list we have Indian Hotels, a Tata group company.

The hospitality firm's stock is up 45% so far this year.

Ever since Indian opened its borders for foreign travelers and Covid cases reduced, shares of Indian Hotels have been on an uptrend.

Revenge travel is here and people are exploring leisure activities, like exploring new destinations. This bodes well for hotel stocks like Indian Hotels.

Also, wedding season is underway, and this has fueled hotel prices to pre-Covid levels.

Indian Hotels, with its flagship Taj brand, is synonyms with impeccable service. It's present across the entire hospitality value chain.

The company has increased its operating margins and transformed its balance sheet by reducing debt by selling its unprofitable international properties.

With strategically located properties and increased focus towards an asset-light model, Indian Hotels is well-positioned to benefit from the growth in tourism.

#3 Cholamandalam Investment & Finance

The third top performing midcap stock of 2022 is Cholamandalam Investment. The stock is up 43% so far this year.

Cholamandalam Investment announced its operation update last month. For the quarter ended 31 March 2022, its disbursements grew a massive 58% to Rs 127.2 bn.

For fiscal 2022, the disbursements stood at Rs 354.9 bn, a growth of 36% as against Rs 260.4 bn in the same period a year ago.

Cholamandalam Investment & Finance is one of the premier diversified non-banking finance companies (NBFCs) in India, engaged in providing vehicle finance, home loans, and loan against property.

To know more, check the company's financial factsheet and its latest quarterly results.

#4 Jindal Steel & Power

As rising raw material costs push steel prices to record high level, Jindal Steel & Power (JSPL) continues to benefit from the commodity boom.

JSPL is among the top private steelmakers. The company has increased prices of hot rolled coil (HRC) as steel prices rose since February this year.

It recently reported a strong operational performance. JSPL posted the highest ever production in March 2022 quarter.

What gives the company an edge is that it has captive mines. It gets an uninterrupted supply of raw materials. When steel prices rise, big companies like Tata Steel, JSW Steel, and JSPL are better positioned as they have captive mines.

For more details, check out Tata Steel's factsheet and its quarterly results.

#5 AU Small Finance Bank

Last on the list is AU Small Finance Bank.

Shares of the private bank are up over 30% this year owing to good quarterly results. The bank announced double benefits of bonus shares and dividend for shareholders to mark its fifth year of operations.

The company's board recommended a bonus issue of one equity share for every equity share held along with a dividend of Rs 1.

AU Bank's net profit more than doubled in the March quarter to Rs 3.5 bn while asset quality also improved.

What's more, the Jaipur based bank has big plans going forward. It is expecting to grow balance sheet by 30% for the next five years and plans to raise fresh equity capital in financial year 2023.

AU Small Finance Bank is primarily engaged in providing banking and financial services in India.

Incorporated in 1996 as a NBFC, it mainly focuses on retail financing.

To know more, check out AU Bank's factsheet and its latest quarterly results.

Which other midcaps have gained the most in 2022?

Apart from the above, here are other top performing midcap stocks of 2022.

Top Performing Midcaps in 2022 so far

Company Change (%)
Hindustan Aeronautics Ltd. 30%
Ruchi Soya Industries Ltd. 28%
CRISIL Ltd. 27%
Varun Beverages Ltd. 25%
M&M Financial Services Ltd. 22%
Canara Bank 15%
Trent Ltd. 14%
The Federal Bank Ltd. 14%
Bharat Electronics Ltd. 13%
Page Industries Ltd. 13%
Source: Equitymaster

Should you invest in mid-cap stocks?

Mid-cap stocks usually have a higher growth potential than large-cap stocks.

However, they can be volatile at times.

There are chances these companies can grow to become future largecaps and add huge value to your portfolio, but there are equal chances for them to drag down your portfolio returns.

They are sensitive to market movements and react to good or bad news.

However, these are stocks that one cannot miss and are often considered hidden treasures.

Midcaps help in diversifying your portfolio. They can boost a portfolio's returns in the long run.

Investors with a high-risk tolerance and a long-term investment horizon can consider adding select mid-cap stocks to their watchlist.

But before investing in these companies, assess the fundamentals and valuations of the business.

Happy Investing!

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...

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