
Jefferies highlighted the continued outperformance of small and midcap stocks over large caps in 2024, building on their sharp rally in 2023. The NSE Midcap index is currently trading at a 24% premium to its 5-year average, compared to a 6% premium for NIFTY.
The brokerage estimates a 20% EPS CAGR for the NSE Midcap index during FY24-FY26, significantly higher than the 12% CAGR projected for NIFTY. This growth is supported by higher earnings expectations and a bottom-up approach for stock selection in 2025.
Jefferies has issued BUY ratings for companies like Amber, Nykaa, Coforge, Entero, Bharati Hexacom, and Sunteck, projecting an EPS CAGR of 35% or higher. Additionally, companies with an ROE expansion of 500 basis points or more, including Colgate, Jubilant Food, Voltas, Delhivery, Nippon Life AMC, Thermax, and Syrma, are also recommended.
Jefferies noted that some stocks, such as Allcargo Logistics, Newgen, HEG, KEI, IDFC First, and Bandhan, are trading at over a 40% discount to their historical 5-year average PE, providing attractive entry points.
The brokerage remains selective, urging investors to focus on high-growth segments and discounted valuations while emphasizing the importance of a bottom-up investment strategy for 2025.
Disclaimer: The above is for informational purposes only. Please consult a financial advisor before making any investment decisions.