S Krishna Kumar, CIO of Sundaram Asset Management, is positive on the commercial vehicle and ancillary suppliers with a two year view
The market had seen a stupendous rally in 2017 with the Nifty rallying close to 29 percent. The Nifty Midcap index surging 47 percent last year followed by record highs in January.
The market corrected less than 10 percent after that but recouped those losses. It rallied over 9 percent to hit a record high on the Sensex and reclaimed the 11,000 mark on the Nifty. The midcap and smallcap indices also corrected 12-20 percent but have started to recover.
The midcap index is trading at a 10 percent premium while the smallcap index is at a 10 percent discount to benchmark indices, S Krishna Kumar, CIO of Sundaram Asset Management, told CNBC-TV18. Given the correction in midcaps and as the market heads into earnings season, he sees momentum picking up in that space.
"Fundamentals of midcaps are strong and valuations intact after the recent correction. We sees a bit of shift from largecaps to midcaps over next 3 months." He also expects a strong rally in largecaps if global cues do not spoil the party.
Kumar is positive on the commercial vehicle and ancillary suppliers with a two year view. He is also turning his stance on the building material and consumer durables. "This space was looking weak due to slackness in demand and transition to the Goods & Services tax. But valuations are looking attractive after a 30-40 percent correction."
The software space has seen a strong rally in the last 12 months on likely improvement in growth and rupee depreciation versus the dollar. "Since the IT story has played out, we would be neutral on the midcap space."
Kumar said the pain in pharma is over, with a bottom in place in stock prices, so it should see interesting times going forward.Another theme the fund house is betting on is services due to the expected shift to a formal economy. "We see a lot of emerging services coming up in retail, hospitality, entertainment and healthcare. We will play this theme through midcaps."