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The 3 Smallcaps Richa
Found Hardest to Reject
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Time to Swap Your Horses? This is Why Mid-cap Stocks May Outperform Largecaps
In the stock market, it's said 'don't swap the horses in the midstream'. But I believe it's time for Indian investors to swap large-cap stocks (Nifty50) to mid-cap stocks.
The mid-cap underperformance for 35 months against the Nifty50 index ended in November 2020 and an outperformance phase began. Between November 2020 to December 2021, the Midcap index gained 82% while the Nifty gained 52%.
But since the start of 2022, the midcap index witnessed selling pressure with a loss over 9% compared to Nifty's 7% loss.
Time to buy Midcaps over Nifty50
The ratio chart below highlights how history is repeating itself. It's trending above the 200 DEMA with a bullish range-shift on the RSI.
Midcap/Nifty Ratio Chart
Historically, an outperformance cycle of Midcap over Nifty lasts over 3 years, and this cycle is 2 years young so far.
I believe till mid of 2023, the midcap outperformance may continue.
Traders and investors should look out for the best mid-cap stocks as these stocks can literally have the best of both worlds...quality and potential.
However, buying the best mid-cap stock does NOT mean picking a few from the benchmark BSE Midcap Index.
Thoroughly screening mid-cap stocks based on quality of business, growth potential, and valuations, can help you arrive at some of the best buys.
I'll share more on his trend on my Telegram group. If you're interested in being part of my charting journey as I share how to create wealth from profitable trade setups, join my telegram channel - Fast Profits Daily.
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...
Brijesh Bhatia Research Analyst and expert chartist, is the editor of Alpha Wave Profits. Fully committed to his craft, Brijesh has mastered the art of making money by trading using technical analysis. Brijesh has an MBA from ICFAI and 16 years of experience in India's financial markets. He began his career on Dalal Street as commodities dealer and it wasn't long before he developed his own unique trading system. Brijesh worked on his trading system until it could be expected to deliver 5 units of return for every unit of risk.
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