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Saturday, March 28, 2009

Mid Cap Value Stocks - Consutruction Sector Mid Caps Outperform Large Caps

Looking at the recession and it's ripple effect on stock markets, construction sector was one of the worst hit sector in Indian stock markets. is it still the case? Are people buying stocks of construction sector? If yes, which stocks are investors investing in? And should you also buy stocks of these companies?

Out of 35 construction companies, those with a market capitalization of less than Rs 1,000 crore outperformed their larger counterparts in the fortnight to March 26. The total market capitalization of the seven large cap companies—Rs 57,275.52 crore as on March 26—has risen by 17% since March 9. On the other hand, the market cap of mid cap companies—the remaining 28 companies—has grown 21% in the same period to Rs 6391.81 crore. The Sensex rose by 20% in the same period.

Large cap companies include Larsen and Toubro, Punj Lloyd, Jaiprakash Associates, IRB Infrastructure, IVRCL Infrastructure, Nagarjuna Construction and Era Infra Engineering while the rest lie in the mid and small cap categories.

One of the reasons for the outperformance of the mid cap companies, is that most in the list of remaining 28—namely, Hindustan Construction, Patel Engineering, Simplex Infrastructures, Gammon India, Consolidated Construction, Sadbhav Engineering, BL Kashyap & Sons, Ahluwalia Contracts, Madhucon Projects and Subhash Projects—have seen huge bargain buying in the last few trading sessions. These are the companies, which were earlier in the large cap space in the same period last year but were pounded heavily as they were in the lower end among their larger players.

For example, HCC, Patel and Gammon had a market capitalization in excess of Rs 3000 crore on March 23, 2008 but now they quote below Rs 1000 crore. This has led to some value buying as they are up by around 20% since March 9.
Source: EconomicTimes

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