Midcap sell-off: IndAsia Fund Advisors sees great opportunity in niche plays

Operating profit is the amount realized from a business's ongoing operations. It serves as a highly accurate indicator of the business's potential profitability because it excludes all extra factors. Moneycontrol analysis showed there are 7 companies from the BSE universe that have given at least 15 percent operating profit growth in FY20 compared to the previous fiscal year (FY19). We considered only companies where FIIs and MFs, both, increased stake in the first two quarters of FY21. Interestingly, in FY21 so far, all of them have been trading in the green and have gained between 20 percent and 190 percent. (Data Source: ACE Equity)

Pradip P Shah, Chairman, IndAsia Fund Advisors, sees upcoming elections not global cues driving market direction going forward. “There is some uncertainty in the market after the recent Karnataka by-election result, which pointed to some loss of popularity for the Bharatiya Janata Party government. This may translate in lower votes and might restrict the government from making structural changes,” he said in an interview to CNBC-TV18.

On the macro front, he feels rising crude oil prices may hurt India’s current account deficit. “The Reserve Bank of India to a certain extent said if inflation goes up (due to rise in crude oil), it might act as a spoilsport for everyone because interest rates will also go up.”

Commenting on the recent correction in the midcap space, Shah said the selloff offers a golden opportunity to investors to pick up stocks having good management pedigree, products, demonstrated track record of achievements and reasonable valuations. “We did see a big run-up in prices in the last two years and a correction will bring them to fair value. They still enjoy growth and have the ability to grow faster than the market. I think there will be select possibilities,” he added.