From the March ‘09 low, S&P Nifty index has rallied ~86% till date and is currently trading at 16x FY11 P/E post factoring the recent earnings upgrade. Despite the phenomenal run-up, there are multiple stocks of various capitalizations that represent attractive long-term investment opportunity. Continuation of fund flow momentum and strengthening of India’s structural growth is expected to push equity markets further up in the years ahead.
Under the said scenario, we believe that non-index stocks/midcaps would continue to outperform the broader market alike last year where the CNX Nifty Junior and CNX Midcap delivered an alpha of 84.8% and 60.4% respectively over the Nifty index. The New Fund Offering (NFO) by DSP BlackRock aims to identify and invest in 20-25 companies from the Top 200 by market capitalization. Being a multi-cap fund with heavy concentration in midcaps, the fund is a good investment for investors with low-to-medium risk appetite.