ICICI Securities Top Picks: Bet on these 21 Midcap and Smallcap Stocks, Earning Yield 20% Higher than Largecap

Smallcap and midcap stocks have outperformed largecap stocks since last one year. However, the valuations of small cap and midcap stocks have declined somewhat. Investors are nervous due to the high PE ratio of small cap and midcap stocks. But brokerage firm ICICI Securities says that investors should not panic about the high valuation of these stocks.

ICICI Securities said in its note that when the economic recovery picks up pace, there will be a rally in the broader market once again. While the Nifty 50 has gained 53% in the last one year, the Nifty Midcap 50 index has gained over 80%. While the Nifty 50 has gained 12% so far this year, the Nifty Midcap 50 index has gained 25%.

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ICICI Securities said that after the end of the year 2019, the yield spread of midcap and smallcap companies has decreased compared to large cap companies, but it did not go into the negative zone. The brokerage firm says that small cap and midcap companies are expected to see tremendous growth in earnings in the next few years.

In such a situation, brokerage firm ICICI Securities has picked 21 midcap and smallcap stocks whose earnings yield spread is up to 20% higher than largecap stocks. The brokerage firm has suggested investors to bet on these 21 stocks without worrying about high valuations.

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Top Picks of ICICI Securities

The smallcap and midcap stocks that ICICI Secuties has recommended for buy include Oil India, Power Finance Corporation, Karur Vysya Bank and Garden Rich Shipbuilders. Their earning yield spread is 20% higher than large cap stocks.

Whereas, companies with earnings yield spreads at least 10% higher than large caps include Federal Bank, NHPC, CESC and Engineering India. Apart from these companies with 10% higher earning yield spread include Visakha Industries, PTC India, Shriram City Union Finance.

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Apart from these, the brokerage firm has asked to bet on Tata Communications, Aditya Birla Capital, Mahindra CIE, Kalpataru Power, VRL Logistics, Green Panel, Bajaj Consumer Products and Mishra Dhatu Nigam along with ACC and TVS Motors.

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