Beware of micro caps and illiquid stocks; large caps hold promise: Kotak MF's Harsha Upadhyaya

Stay invested in large caps

Indian markets have seen a relentless rally that has catapulted the benchmark indices to record highs. As the 50-share Nifty approaches the crucial 22,000 mark, should investors exercise caution, especially when it comes to the mid & small cap space? In an exclusive chat with Harsha Upadhyaya, Chief Investment Officer at Kotak Mutual Fund, he underscores the importance of exercising prudence in smaller market cap companies and illiquid stocks. He points out that not all of these entities have seen an uptick due to robust fundamentals, but their ascent can be attributed to a lack of liquidity, with money chasing specific names. Here are the top 10 takeaways from his interview:

1. Medium to long-term investors can expect decent returns; rising valuations could mean higher volatility.

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2. Advises caution in small cap and illiquid stocks due to liquidity-driven spikes.

3. Large caps, particularly in BFSI space, look good for investment with reasonable valuations and potential stability.

4. IT sector rally linked to 2024 Fed rate cut expectations, prompting valuation re-rating.

5. Positive outlook for specialty chemicals with expected margin improvement.

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6. Favour capex beneficiaries over consumption due to weak rural trends and deficient monsoon.

7. Regulator caution on unsecured credit seen affecting fintech more than major banks or NBFCs.

8. NBFC sector growth rates may be impacted, but listed players expected to continue recent growth.

9. Cautious approach to new tech firms; each company should be analysed individually based on underlying business and valuations.

10. Positive stance on food delivery in tech sector due to clearer path to profitability.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.