{"id":117427,"date":"2021-06-30T09:38:33","date_gmt":"2021-06-30T09:38:33","guid":{"rendered":"https:\/\/fin2me.com\/?p=117427"},"modified":"2021-06-30T09:38:33","modified_gmt":"2021-06-30T09:38:33","slug":"quality-mid-cap-small-caps-should-continue-to-do-well","status":"publish","type":"post","link":"https:\/\/fin2me.com\/business\/quality-mid-cap-small-caps-should-continue-to-do-well\/","title":{"rendered":"‘Quality mid-cap small-caps should continue to do well’"},"content":{"rendered":"

‘As valuations of large-caps appeared to be out of whack, investors started lapping up quality mid-caps and small-caps, which were available at relatively comfortable valuations.’<\/strong><\/p>\n

“The market is still predicting that the impact of the second wave of COVID-19 cases won’t as severe as last year,” Lav Chaturvedi<\/strong>, ED & CEO, Reliance Securities, tells Ashley Coutinho<\/strong>.<\/p>\n

What are the risks for the market this year?<\/strong><\/p>\n

While the Indian economy started witnessing momentum after a sharp fall in economic activities induced by the pandemic last year, the second wave of COVID-19 cases and enhanced mobility restrictions imposed by several states have cast a shadow on the recovery phase.<\/p>\n

The market is still predicting that the impact of the second wave of COVID-19 cases won’t as severe as last year.<\/p>\n

Any prolonged economic restriction by large states beyond June and the further spread of COVID-19 cases in the hinterland, where the health care system is not up to the mark, can be the biggest risk to the domestic economy and equities.<\/p>\n

What is your take on current valuations?<\/strong><\/p>\n

The Nifty currently trades at 23x one-year forward earnings, which is over 25 per cent premium to its long-term average.<\/p>\n

Further, on the market cap to GDP parameter, India is trading above 100 per cent as of now, mainly due to contraction in GDP last year.<\/p>\n

However, the spread between government security yield and Nifty earnings yield is still 110 basis points (bps<\/em>), which is quite low compared to the long-term average of 185 bps and, therefore, we believe equity class is expected to remain a preferred investment option.<\/p>\n

How do you assess corporate earnings in Q4?<\/strong><\/p>\n

Notwithstanding cost inflation, Q4FY21 earnings growth is expected to be strong considering the low base of last year and a sharp demand recovery with improved capacity utilisations.<\/p>\n

In our view, higher capacity utilisation can potentially negate the sharp rise in input and freight costs to an extent.<\/p>\n

However, results of heavyweight financials\/BFSIs are expected to be crucial for overall Q4 earnings growth of Nifty50 companies, given the recent order by the Supreme Court.<\/p>\n

Do you see the outperformance of broader markets to continue?<\/strong><\/p>\n

The outperformance of mid-caps and small-caps was mainly on account of improved earnings visibility of corporate India.<\/p>\n

As valuations of large-caps appeared to be out of whack, investors started lapping up quality mid-caps and small-caps, which were available at relatively comfortable valuations.<\/p>\n

As we still believe that a corporate earnings recovery is very much on the cards, quality mid-caps and small-caps should continue to do well in the medium to long term.<\/p>\n

Which sectors are you betting on in the coming months?<\/strong><\/p>\n

A low-interest rate scenario in the last two years has certainly benefited rate-sensitive sectors.<\/p>\n

This has also aided the real estate market to see a sharp volume increase in recent months.<\/p>\n

Additionally, the strong pricing scenario and the uptick in demand globally aided metal stocks.<\/p>\n

Further, the announcement of a sharp increase in capital expenditures in the Union Budget fuelled a rally in infrastructure, cement, industrials, and capital goods.<\/p>\n

We believe sectors, which are beneficiaries of the capex revival, are likely to outperform from a medium-to-long-term perspective.<\/p>\n

What is your take on banking and NBFC stocks? Is the sector out of the woods yet?<\/strong><\/p>\n

We believe prolonged mobility and economic restrictions in states can adversely impact the growth trajectory of banks and NBFCs in the medium term.<\/p>\n

The sharp rise in daily caseload and wider economic restrictions by several states again posed risks to the asset quality of unsecured personal\/MFI\/consumer durable and even MSME loans.<\/p>\n

However, any such disruptions in economic activity always have a cascading effect in the subsequent months.<\/p>\n

This will impact both credit growth and asset quality assumptions for retail banking and NBFCs.<\/p>\n

What are the key trends you see emerging in FY22 for the broking industry?<\/strong><\/p>\n

A record increase in new clients onboarding and robust average daily turnover benefitted the broking industry during FY21.<\/p>\n

Given the cyclical nature of the broking business, along with the high base, market volatility, and phased implementation of new margin regulations, one can expect some tapering-off in the industry’s growth in FY22E.<\/p>\n

However, we still believe digital adoption and continued emphasis on improvising operating efficiencies can surprise all on the margins front.<\/p>\n

In our view, the industry is clearly shifting its focus from volumes to the number of trades, which may prompt brokers to target more customers onboarding and activation.<\/p>\n

Source: Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

‘As valuations of large-caps appeared to be out of whack, investors started lapping up quality mid-caps and small-caps, which were available at relatively comfortable valuations.’ […]<\/p>\n","protected":false},"author":3,"featured_media":117426,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"yoast_head":"\n'Quality mid-cap small-caps should continue to do well' - Fin2me<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fin2me.com\/business\/quality-mid-cap-small-caps-should-continue-to-do-well\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"'Quality mid-cap small-caps should continue to do well' - Fin2me\" \/>\n<meta property=\"og:description\" content=\"‘As valuations of large-caps appeared to be out of whack, investors started lapping up quality mid-caps and small-caps, which were available at relatively comfortable valuations.’ [...]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/fin2me.com\/business\/quality-mid-cap-small-caps-should-continue-to-do-well\/\" \/>\n<meta property=\"og:site_name\" content=\"Fin2me\" \/>\n<meta property=\"article:published_time\" content=\"2021-06-30T09:38:33+00:00\" \/>\n<meta name=\"author\" content=\"Mark\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:image\" content=\"https:\/\/fin2me.com\/wp-content\/uploads\/2021\/06\/Quality-mid-cap-small-caps-should-continue-to-do-well.jpg\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Mark\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/fin2me.com\/business\/quality-mid-cap-small-caps-should-continue-to-do-well\/\",\"url\":\"https:\/\/fin2me.com\/business\/quality-mid-cap-small-caps-should-continue-to-do-well\/\",\"name\":\"'Quality mid-cap small-caps should continue to do well' - 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