It is followed by the midcap indices of Hong Kong and Indonesia with 12.9% and 12.6% returns, respectively.
In addition, due to surging stock prices, premium of the Nifty Midcap 100 index valuation over that of the benchmark Nifty 50 is at 12.6% — near record high. This compares with the 10-year average of 9.8% discount.
Better-than-expected earnings have been attracting investors.
According to Bloomberg, the projected earnings growth for the midcap index is 57% and 24% for 2016 and 2017, respectively. For Nifty, which represents large caps, it is 15% and 19%, respectively.
Analysts believe investors need to be more cautious. They need to look for companies with earnings visibility, sound corporate governance, lower debt and earnings growth of over 20%.
CLSA recommended a switch to Crompton Greaves Consumer Electricals from Havells India, to Inox Leisure from PVR, and to Adani Transmission from JSW Energy.
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