Healthy correction bringing us closer to bottom, FIIs will return: Venugopal Manghat, HSBC MF

"We are in an structural expansion for the economy, and a platform has been set for smaller companies. As the economy doubles by 2030, the landscape for market too would change," Venugopal Manghat said.

HSBC Mutual Fund believes the ongoing correction in the small and midcap space has been healthy, and the markets may be getting closer to the bottom after the 20 percent fall for the smallcap index from the recent highs.

Speaking to CNBC-TV18, CIO-Equity at HSBC MF, Venugopal Manghat said he finds some of the smaller names in discretionary and manufacturing space to benefit and grow significantly over next 5-7 years, as the economy looks set to double by 2030 to $7 trillion.

"We are close to the bottom and it is a good time to invest," Manghat added.

The CIO added that these spaces are where wealth is likely to be made and the deep, 20 percent correction after the recent run up in smallcaps is welcome. The top fund manager agreed that the valuation in broader market spaces still look expensive, along with many largecaps, IT and other consumer names that are still trading at expensive multiples.

"We are in an structural expansion for the economy, and a platform has been set for smaller companies. As the economy doubles by 2030, the landscape for market too would change," Venugopal Manghat said.

Manghat said he would be looking for value in the discretionary space, where stocks for the longer term can be scouted as valuations are now coming to a more reasonable level. The RBI rate cuts and income tax relief in the Union Budget should help the consumption theme over the next 3-5 years, he added. The CIO is also bullish on the non-lending theme within the financial space, which he believes will expand significantly.

Manghat drew a similarity with the US economy of the eighties. As the US GDP grew by ten-fold, the American financial assets rose by more than 20-fold, Manghat added, leading to more opportunities for the non-lending financial theme.

He also said that the bulk of the foreign selling may be behind us, and the ferocity of the outflows may not continue. Markets are likely to bottom out soon and FIIs will re-look at India, Venugopal Manghat added.

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