HSBC suggests top midcap picks; deeper drop unlikely

HSBC prefers large caps in 2024, but sees midcap opportunities in the sell-off.

The firm said a deeper correction of 20%-30% in small and midcap segments, which was last seen in 2018, is unlikely now due to stronger domestic economy, broader market not being very expensive, and higher flows from SIPs. "We remain constructive on the broader market... Any deep sell-off in midcap from current levels seems unlikely and investors will likely use these opportunities to buy into midcaps," it said.

The brokerage said the share declines in mid-cap and small-cap segments are due to an exceptional run last year. "Midcap breadth has come down from 90% to 73% now, but is still above long-term mean, suggesting room for further correction if market conditions turn adverse," its analysts said.