Small and midcap stocks down 15% in 4 months, Nuvama shares 20 bottom-up ideas
Small and midcap stocks have tumbled 15% since September 2024, weighed down by slowing domestic growth and tightening liquidity conditions. According to Nuvama Institutional Equities, the correction bears a strong resemblance to past downturns in 2011 and 2018, raising the risk of a prolonged bear market rather than a short-term blip.
The brokerage warned that despite the recent slide, valuations remain elevated, suggesting that further downside risk persists unless policy intervention provides relief. Nuvama expressed a preference for exporters such as chemicals, domestic laggards with profitability nearing a bottom like cement firms and quick service restaurants, and consistent compounders.
“A dovish Fed and sizable domestic easing are key to turning bullish,” Nuvama said in its report. Against this backdrop, the brokerage has identified 20 small and midcap stocks with strong bottom-up potential, categorizing them into three themes: Restructurers, or turnaround plays poised for recovery; Re-investors, which are consistent compounders with strong earnings potential; and Rewarders, dividend-yielding companies offering stability in volatile markets.
Restructurers: Turnaround stories
Nuvama has picked United Breweries, Balkrishna Industries, Jubilant FoodWorks, UPL, JK Cement, Emami, Crompton Consumer, and Jubilant Ingrevia as stocks with turnaround potential. These stocks have seen price corrections but hold potential for recovery as profitability improves.
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