Nifty Mid-Cap Stocks To Buy

JC Parets
June 14, 2018

Mid and small-cap stocks have been under-performing their large-cap counterparts as of late, however, it's important to remember when looking at an index that it's basket of stocks and therefore looking at each of the components can unearth great opportunities. In this month's (Premium) Members Only Conference Call we spoke about the strength in the Financial Services, Information Technology, Consumer Goods, and Energy sectors, so this is a follow-up post looking at the mid-cap stocks, many of which are in these sectors, that we want to be buying.

Before we get into individual stocks, I want to highlight the potential failed breakdown that we're watching in the index itself. Last week prices undercut the March lows as momentum diverged positively. If we can get back above 19,200, it would confirm a failed breakdown and likely be the catalyst to push this market to new all-time highs. Due to the strength we're seeing in the stocks discussed throughout this post, we think that is the higher probability outcome, but remain open-minded and have defined our risk in each of the names we want to be buying in case we're wrong.

Click on chart to enlarge view.

The first stock on our list is United Breweries Ltd, which is breaking out of a 3-year base after an aggressive rally sparked by the failed breakdown in March. As long as prices are above 1,210 we want to be aggressively long and looking to take profits near 1,550.

The next name I want to highlight is Pfizer Ltd. because despite the strong downtrend in the Nifty Pharma Index,  this stock is making new all-time closing highs as it breaks out of a 3-year base. Prices are now back at the intraday highs set in 2015 and may pause slightly to work off this bearish momentum divergence, but ultimately we think prices are headed a lot higher. For risk management purposes we want to be long only if we're above 2,600 and taking profits near 3,260.

Here is a list of the remaining mid-cap stocks we want to be buying:

For the fifth time in the last year, AU Small Finance Bank Ltd. is attempting to break above resistance near 726. If prices can close above that level we want to be long and look to take profits near 870.

Bajaj Holdings & Investment Ltd. has been consolidating for the last year and is now back toward the top of its range. The more times a level is tested the more likely it is to break, so we want to be buying a breakout above 3,045 with a price target of 3,845.

Bharat Financial Inclusion Ltd. is currently between our risk management level of 1,065 and our price target of 1,240, but is one to watch as we think it ultimately reaches that price target and gets above it. If it does, we want to buy a breakout above 1,240 with a target at the 2010 highs of 1,450.

Bata India Ltd. broke out of a 2-year base last October, retested the breakout earlier this year, and is now off to the races once again. As long as prices are above 706 we want to be long with a price target near 896.

Berger Paint is a Consumer Good's name that broke out of a 1.5-year base last month and is now retesting the breakout area as it works off a bearish momentum divergence. As long as prices are above 275 we want to be long this name and taking profits near 338.

Exide Industries Ltd. broke out of a 1-year base in early May, undercut the breakout area on its retest, and quickly reversed higher. This suggests buyers are still in control of the stock and therefore we want to be long if prices are above the May lows of 242 and taking profits near 285.

Godrej Properties Ltd. broke out of a 6-year base in March 2017 and has been trending higher since. Prices quickly met our second price target near 861 earlier this year and have been consolidating underneath since. If prices can break above 862 we want to be buying the stock and taking profits near 1,300.

Hexaware Tech broke out of a 2.5-year base late last year and has been trending higher since, quickly meeting out price target at 433. Prices have been consolidating nicely since, so we want to be buying a breakout above the recent highs of 460 with a profit target of 591.

Mindtree Ltd. broke out of a 3-year base in March and quickly met our first price target of 1,063, which it's been consolidating under since. If prices can get back above 1,063 we want to be long with a profit target of 1,475.

Mphasis Ltd. broke out of a massive 8-year base in late January and quickly met our first price target of 1,120. This is an extremely strong uptrend that we want to be involved in if prices are above 1,120, as our next profit target is near 1,460.

Page Industries just made a new all-time closing high and remains in a strong uptrend after breaking out of a 2-year base last August. We want to be buying this breakout above the former highs of 25,400 and taking profits at 28,600.

RBL Bank Ltd. is a name to watch as it makes new 52-week highs today. As long as prices are above this downtrend line (540) we can be long and taking profits near the all-time highs of 598.75. If you're more conservative, you can wait for a breakout above 598.75 to signal the start of a new intermediate/long-term uptrend and look to take profits near 690.

Solar Industries India broke out in July 2017 and has been trending higher since. After retesting the prior breakout area near 960 in March, prices are right back at all-time highs. This suggests we want to be long if prices are above 1,180 with a price target of 1,540.

Thomas Cook India broke out of a 2.5-year base in March, retested the breakout last week, and is headed higher. As long as prices are above 255 we want to be long and taking profits near 311.

The last name on our list is Varun Beverages which broke out of a 6-month base in late May and has been consolidating since. We think this is a healthy retest of the breakout area as momentum works off a bearish divergence, so we want to be long above 721 and taking profits at 815 and our secondary price target of 954.

The Bottom Line: While the Nifty Midcap Index has under-performed large-caps as of late, there continues to be plenty of opportunity on the long side in individual names. As you can see from the list discussed in this post, there are stocks in many sectors showing relative strength if you take the time to look.

Additionally, this strength may be suggesting that the break below 19,200 in the Nifty Midcap Index might be a failed breakdown and that a confirmation of it could be a catalyst to push the market to new highs. While we wait for the market to prove our thesis correct/incorrect, these are the stocks with reward/risk ratios skewed in favor of the bulls and well-defined risk that we want to be involved in.

Thanks for reading and please let us know if you have any questions.

Allstarcharts Team

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