India Strategy: Midcaps - Double your stake, quadruple your money

Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years - Warren Buffett

After five tumultuous years for Indian equities as an asset class, we are at the onset of a new multi-year Bull Market. In this phase, we assign high probability to Nifty delivering 60% return or even doubling in 4 years. Many individual stocks, in the meanwhile, could double in much smaller periods. While many would be skeptical of taking fresh positions given the new highs that benchmark indices and stocks have hit, our belief is that it is just the beginning. Our premise for this belief is purely tectonic given that India has achieved political stability and is on the course of repairing its macro economic situation. Moreover, valuations are nowhere close to the highs achieved in the previous Bull run and are near long term historical average levels.

Globally too, things are getting better with macro factors in US (except Q1 CY14 GDP, which was a blip) showing signs of recovery. Euro Zone has also shown stability post the financial crisis. With Japan and Euro Zone likely to ease monetary policy, liquidity is expected to be benign and will chase growth in emerging nations leading to strong FII inflows. India, for the aforementioned factors is one of the most attractive destinations.

Empirically, during Bull markets, midcaps outperform large caps. To make the most of the ensuing Bull run, we have handpicked several interesting mid cap stocks having potential to double in two years. All stocks rank high in terms of earnings growth potential, balance sheet strength, future cash flows, management bandwidth and valuation appeal.