The Midcap story was on the downtrend since mid 2018, and market watchers have been waiting for a recovery. The first months of 2019 however, has seen midcaps continue to be volatile, as pre-election jitters, US-China and now India-Pakistan tensions impact this segment further. 

The PE charts provide at a glance, how Nifty50 midcaps have taken a significant hit compared to the Nifty50 and Nifty500 PE numbers. This suggests that midcaps are available now at affordable valuations - however it is hardest for investors to know where the bottom is, and if they are genuinely getting a stock at bargain price. One interesting indicator here is the earnings per share (EPS) of Nifty Midcap50, which has jumped in the past three months, compared to the EPS of the Nifty500. So while the PE of the Nifty Midcap50 has fallen, the EPS has jumped, moving in opposite directions and good news for investors looking to buy. 

EPS of Nifty 500 closely tracks the PE

The Earnings Per Share for Nifty500 stocks has actually fallen in the last three months, while the PE of the same universe has risen slightly. In contrast, the Nifty50 Midcap PE and EPS has moved in opposite directions with EPS showing strong improvements. 

Is the decline story over for midcaps? Markets function on sentiment in the short-term, but the numbers at least, are positive for this universe.