What mid and small-cap stocks have witnessed so far in 2018 is nothing short of a carnage, but experts believe that it has offered a window for investors to bet on quality names.
Speaking on the sidelines of Moneycontrol’s Wealth Creator Awards 2018, experts highlighted how valuations and possible earnings recovery could aid such stocks.
“Mid and small-cap stocks are no longer a falling knife (kind). There has been a destruction in these names in the past 10-11 months and the market at these levels have bottomed out. In fact, we are now seeing consolidation before making the next move upwards,” Ambareesh Baliga, an independent market expert said.
Midcap indices have fallen 13-16 percent year-to-date (YTD). Small-cap index, meanwhile, has fallen 25 percent in 2018 so far. To put this in context, small-cap index’s fall is equal to what Sensex and the Nifty had gained in 2017.
The recent correction has ignited the debate — what are ‘comfortable’ valuations to enter for mid and smallcaps?
For instance, A Balasubramanian, Chief Executive Officer at Aditya Birla Sun Life AMC, believes the current situation of Indian market is that of not being very expensive, but not a very attractive one as well.
“Smallcaps have corrected 34-35 percent and that has brought valuations at reasonable levels. Risk in the system seems to have reduced and stocks look reasonably attractive,” he told the portal on the sidelines of the event.
Apart from pure valuation plays, should fundamentals (in terms of earnings) be also considered?
Nifty companies have had a good earnings story. The growth rate has been around 17 percent and only about 2-3 companies disappointed the Street, explained Krishna Kumar Karwa of Emkay Global.
“In the small and mid-cap segment, earnings have been a mixed bag. On an aggregate basis, one-third companies reported results on expected lines, while one-third of those were below expectations. The balance 33 percent of companies posted disappointing earnings. The momentum is improving for largecap earnings and that could flow into mid- and small-caps as well,” he further told the portal.
To sum up, experts feel that while one could look at these sectors, it would be prudent to keep quality names in mind.
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on Moneycontrol are their own, and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
No comments:
Post a Comment