Rahul Sharma, Co-Founder, Equity99, says investors should remember that though there is correction because of profit booking but it is the fundamentals that matter. If a company's fundamentals are intact, it is a good bet.
In an interview to Moneycontrol’s Kshitij Anand, Sharma said that there is an opportunity to average good stocks with patience and it will be rewarded in the coming three or four months. Edited excerpts:
What is causing a selloff in the small & midcaps space for the past 2 trading sessions? Is it because of the additional surveillance measures introduced by the BSE?
The introduction of additional surveillance measures triggered a sharp selloff in midcaps and smallcap indices.
Post-COVID second wave, both smallcap and midcap stocks have beaten benchmark returns nearly three times. Post such rally, a correction was evident, which got triggered by the new additional surveillance measures rules introduced by the BSE.
What should be investors’ strategy for the small and midcaps space?
Investors should remember that although there is correction because of profit booking but the fundamentals of companies are intact provided you are invested in a good company.
In fact, it should be seen as an opportunity to add quality mid and small caps at a 20-30 percent discount. This opportunity to average good stocks with patience will be rewarded in the coming three or four months.
After a sharp rally (almost vertical move) seen in the small & midcaps, smart money has started moving towards the IPOs or largecaps? What are your views?
In recent times we have seen multiples IPOs hitting markets, however, to route money from good fundamental companies to IPOs is not recommended.
There might be several cases where taking advantage of the bull market, promoters sell shares through an offer for sale (OFS). This can be seen in various IPOs hitting markets in the current times with a high percentage of OFS .
Any small & midcaps worth looking at after the recent selloff and why?
Our recommendation after this selloff will be:
The company recently declared results, reporting 4x YoY rise in its revenue and PAT at Rs 76 crore against loss of 1 crore. Also, the stock has given a recent breakout after consolidating for almost 2 months. We recommend this stock with a target price of 115–120 and a stop loss of 80.
The stock corrected almost 32 percent from the high of 62 on August 9 to making a low of 42 on August 11.
The fundamentals of this stock are superb and the company has made good progress in its business in recent times. The stock is expected to hit a target price of 80 with a stop loss below 35.
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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