Wealthyvia.com founder Pritam Deuskar is not too perturbed over mid and smallcaps underperformance. He sees them as the wealth-creators and believes that those who have struck rich in the stock market did it by staying on with mid and smallcaps over the years.
In the last two years, largecaps have given minor returns while mid and smallcaps underperformed but in the coming two years, it will be reversed, Deuskar says in an interview to Moneycontrol’s Kshitij Anand. Edited excerpts:
Q) What is your outlook on markets considering that the Sensex is now trading above 40,000 and the Nifty has reclaimed 11,900?
A) The Nifty is currently concentrated in the top five stocks as the weightage in them is as big as 44 percent. So, the winning streak was indeed a result of few stocks from the group which went higher.
TCS, Infosys and HCL Technologies had a good run in the last two weeks where earnings guidance was revised for better days ahead.
Better-than-expected guidance from IT heavyweights helped the sentiment. So sector rotation even in these Nifty heavyweights can keep happening and very few stocks can make it rise.
Q) Small & midcaps have, so far, underperformed the Nifty in October. What are your views?
A) In the last two years, we had only some minor returns by largecap, whereas mid and small underperformed. In the coming two years, I feel it will be reversed.
Profit-booking and volatility are an inherent part of markets and the real long-term investors have to digest all. All I know is anybody who got successful in the stock market has made money with small and mid-size companies growing for multi-years.
It all depends on what you hold. In life and markets, failure is common, success is an exception. Being part of “about to become highly successful” businesses is what creates wealth.
Q) Sectorally, banks and IT stocks hogged the limelight. What led to the price action?
A) Moratorium figures got reduced by a huge quantum earlier. Asset-backed loans like gold or housing are not going to have a great jump in NPA (non-performing assets).
As the economy will be coming back on track, write-back will also come eventually, if at all rise in NPA in unsecured or some distressed sector MSME loan comes.
Every industry consolidates after a crisis. A strong parentage, high cash, and credible management, NBFC, housing finance, and banks will again emerge as winners in the next two years.
Indian IT companies had a compounded knowledge growth for three decades along with intellectual capital at the lowest cost. No other country will be having such an advantage with size. I personally like new technologies that have driven platform/product-creating IT companies than just service companies.
They have a high market to tap into artificial intelligence, IoT, machine learning. Otherwise, platform businesses are in very good shape.
Q) What will you advise Robinhood investors? D-St has already touched the highest Mcap of about Rs 161 lakh crore while Sensex and Nifty are still short of record highs. This may create an environment for a pause or a fall in the near term.
A) We have seen 5-7 percent corrections in between and they are necessary. One-sided growth makes people overestimate their ability to predict market or stocks and misconstrue luck with analysis or understanding.
If your invested company is doing very good in terms of sales, profits, margins, market share and volume growth and plans for further success are having solid grounds, then one should hold it. Don't confuse between markets and stock of your interest.
Disclaimer: The views and investment tips expressed by 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.
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