Daily Voice: This fund manager expects Nifty to hold steady but foresees a correction in mid, smallcaps this year

Some stocks have gone up significantly and considering the element of risk in a smaller company, you need to take extra care while investing in such companies. In certain cases, we also see concentrated holdings, and merchant banker specific run ups.

Not every company from the SME lot will get on to become big and migrate to main board.

Though there are some very interesting companies in the space where we see value and growth, investors have to be very selective and obviously pay more attention to detail while researching and tracking these companies.

Many new-age companies are coming up with SME IPOs where value unlocking opportunity is plenty. Hence, while there are opportunities, the entire space in general could witness drawdown.

How do you view T+0 and T+instantaneous settlements? What are the potential benefits and challenges for the industry?

T+0 will be a magnificent achievement for the Indian markets. In fact, Europe still adopts T+2, while the US markets are experimenting with T+1. This transition, will reduce transaction costs and increase volumes in the overall market. Speculation is likely to increase, however.

Also read: Verlinvest explores selling part stake in Danone & Deepika Padukone backed Epigamia

Do you think most of the fresh allocation in mutual funds is now focused towards largecaps than mid and smallcaps especially after SEBI's note to AMFI?

We are seeing some good opportunities in the largecaps now. Although with the recent correction in the small and midcaps, opportunities are evolving again as stocks are coming back to value zone.

Having said this, we do not see signs of euphoria or heat up in the markets. We still have companies trading below 10x price-to-earnings despite augmenting a 20 percent+ growth rate for the next few years.

The large capital that mutual funds is receiving through SIPs has limitations and would be tilted towards largecaps, considering parking opportunities and valuations.

Also read: Inflation, IIP data meet expectations, but concerns remain

Do you expect a steep correction in the the market this year?

We do not foresee a very steep correction in 2024 but we would not see a 2023 kind of a run up as well. Also, there could be more volatility around political developments and geopolitics. There are pockets of opportunities where stocks and sectors have not run up.

Drastic correction has taken place in specific stocks if not among the entire market. Over the last one month, we have seen several of our “hold” rated stocks return to the “buy” zone.

Chemicals, pharma and telecom are areas where we are finding value. We are seeing interest coming from family offices and HNIs to park money as we witness correction. We are also seeing flows continuing from SIPs. Any correction ahead could be good opportunity to add the stocks which were on the hold list due to the run up.

Is it the right time to add banking & financial services names?

We are seeing slim pockets of opportunities in the private small banks. Banks have been struggling with deposit growth as much of the liquidity is being parked to capital markets and debt products rather than FD (fixed deposits) or savings account — a trend is being witnessed.

At the moment, we are underweight on banking and would wait for valuations to slim before we add major exposure.

Factors that can turn the market mood from optimistic to cautious for a longer period?

SME market could witness deeper correction with the recent SEBI comments and action, further deepening of these sentiments can turn the mood cautious for the broader markets in the near term.

Further factors like geopolitics, interest rates, elections and recession in key nations have to be closely tracked and can impact the market mood in the near term.

I think the Red Sea scenario is being overlooked at the moment. Manufacturing and mainly exporting companies could report significant, around 20 percent+ hike in shipping costs in the upcoming quarter, negatively hitting their margins.

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.