Focus Towards Midcaps
Indian Equity Indices continued their rally on December 13, 2019. BSE Sensex added over 300 points and NSE Nifty 50 index is trading above its important level of 12,000. Is it the right time to focus on midcaps?
In an interview with CNBC TV18, Market Expert Dhiraj Agarwal from Ambit Capital shared his views on whether to focus on midcaps or not.
Q: Quality Financials like ICICI, Kotak, HDFC Bank are quite expensive. Do you think still investors have to stay invested in quality financials only?
On this, the expert Dhiraj Agarwal started saying that generally, the market keeps on rewarding the quality performance and the performance predominantly. Over the many years, the market is segregating based upon the ability to deliver solid earnings, predictable and less volatile and that’s what getting reward disproportionately. The main reason for the disproportionate reward is a choice of the stocks which you want to invest in is reducing due to the more money is chasing a less number of stocks resulting in a much higher valuation. At the broad dramatic level, I think that trend would continue.
Q: The kind of data we have got from November appeared very good. Fuel consumption, airline traffic reported their highest in 2019. Now, do you think the recovery is a little better?.
Dhiraj Agarwal said on the economy side, remember that some of the uptakes in the data we are saying could purely be cyclical rather than structural. Neither the things don’t go up in the straight line nor fall in the straight line. We have seen that in various sectors overcorrection is happening with regard to destocking and demand falling through a level where some amount of mean reversion is bound to happen, Dhiraj added.
Talking about the focus on midcaps he said, midcap companies like pi industries, relaxo footwears and many more delivered outperformance. Now, the market is certainly looking at midcaps. However, the selection buyers to companies which can deliver solid earnings without failing are still there.