Keep your portfolio balanced, advices Manish Chokhani, as small and midcap valuations go 'berserk'

Veteran investor Manish Chokhani has adviced retail investors to be careful with their stock picking in the mid and the smallcap space, where he finds that valuations have gone 'berserk', and multiples have climbed up to twice that of the rest of the market.

Manish Chokhani, Enam Holding's Director told CNBC-TV18 during a conversation said that the small and midcap category, along with the SME IPO space has emerged as a 'bigger worry' than even the futures and options segment of the market.

"That is the risk, some of these SMID names in the fourth quadrant, and what has been going on there is a bigger worry than the F&O space. A Rs 12 crore SME issue attracting Rs 3,000 crore worth of bids are the things you should be worried about."

Chokhkani cited the example of the lower quartile of the NSE 500 group of companies, that has created a lot of wealth, where he fears very few of these companies will graduate to the higher market capitalisation group. Of these 500 companies, the top 130 add up to 75% of India's market capitalisation. The remaining 370 companies, which make up $1.3 trillion in m-cap has seen a lot of price movement and wealth creation. "I am worried about this space," said Chokhani, adding that earnings multiples in this segment are trading at twice that of the rest of the market.