In this article, we will look at some of the Overvalued Midcap Stocks that have corrected the most in 2024. If you plan to invest in midcap companies, you can know how the overall index has performed. Also, which stocks have corrected the most to explore if they can be studied as investment options. If you cannot do the analysis, you can check Portfolio Advisory services to invest in the best mid-cap stocks. Let us get started now.
How have mid-cap stocks performed in 2024?
In 2024*, Nifty50 has given 14% returns to investors, compared to the Nifty Midcap 100 has delivered over 25% returns. This is despite a 3% fall in the index in the last three months. The index peaked in the last week of September, and then there was a sharp fall, where the index fell more than 10% in the 6 weeks. After mid-November, the index has rebounded and is on track to deliver another strong year. *till 13 December
What are overvalued stocks?
Later, we will cover the overvalued stocks that corrected the most, so readers should understand the overvalued stocks. Investors need to stay away from overvalued stocks since they are the ones that fall the most during a market correction. AI financial advisors can help you stay away from overvalued stocks. More on that in some other article. Let us understand overvalued stocks.
Overvalued stocks are stocks trading at a price significantly higher than their intrinsic value, and these are determined using valuation metrics like price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, price-to-sales (P/S) ratio, or comparing the stock’s performance to its industry peers.
Why Overvaluation Matters?
Here is why overvaluation matters for investors and the companies:
For Investors
- Buying overvalued stocks increases the risk of losses if the market corrects the price to align with intrinsic value.
- Long-term gains may underperform due to inflated entry points.
For Companies
- Overvalued stocks can raise capital more easily but may face sharp declines if expectations are not met.
Overvalued mid-cap stocks with maximum correction
We prepared the list of companies that are trading above industry PE (after the correction) and are significantly down from their 52-week high. Here are some of the companies (data as of 14 December):
- Honasa Consumer provides beauty and personal care products through its digital platform. The company’s PE is 106.84 well above industry PE of 37.31. The stock is down 54.61% from its 52-week high.
- Waaree Renewables Technologies is engaged in the business of generation of power through renewable energy. The industry PE is 61.55, while the company’s PE is 74.27 and the stock is down 53% from its 52-week high.
- MMTC Limited facilitates foreign trade in India and canalizes the export and import of essential minerals and metals. The company is trading at a PE of 56.34, well over the industry PE of 37.31 and 40% down from its 52-week high.
- National Standard is presently engaged in the business of Real Estate Development. It is one of the most overvalued stocks on the list, with a PE of 548 (industry PE is 35). The stock price has fallen 34% from its 52-week high.
- Timken India manufactures, distributes, and sells anti-friction bearings, components, accessories, and mechanical power transmission products for customers across different sectors. The stock is down 33.60% from its 52-week high, trading at 60.89 PE, above the industry PE of 31.32.
Will mid-cap continue to shine in 2025?
After an excellent 2024, the question every investor is seeking answers – will the rally in the midcap stocks continue in 2025? While many market analysts remain optimistic about the potential of mid-cap stocks in 2025, concerns about valuations have emerged. Some experts believe that these sectors may have reached unsustainable levels.
Despite these concerns, there is still significant bullish sentiment surrounding these sectors. Many analysts anticipate that mid-cap stocks will continue to outperform large-cap stocks in the coming year, driven by factors such as strong fundamentals, growth potential, and increasing investor interest.
However, short-term market conditions may remain challenging. Some experts predict that the broader market may underperform benchmarks until mid-January 2025, but positive momentum could emerge thereafter.
Before you go,
With so many stocks and so much happening at the company and macroeconomic levels, it is tough for most investors to make good returns from the stock market. If you are among such investors, you can use technology to find the next multibagger stocks. You can use Jarvis Invest, an AI-based stock trading India platform that is helping thousands of investors to invest in the stock market.