The Market Podcast | Focus more on profitability and less on large, mid or small cap: Somnath Mukherjee

The outbreak of COVID-19 has pushed the world to a new normal and for investors to create wealth it makes sense to move away from large-cap, mid or small-cap, Somnath Mukherjee, Managing Partner & CIO at ASK Wealth Advisors says in ‘The Market Podcast’ with Moneycontrol.

If we look at corporate India, 20-22 companies account for almost 70 percent of the profits of corporate India. It is not India specific but it is a global trend. Profits are getting aggregated very efficiently by few firms and the stock market interest is also getting consolidated in those terms, he said.

This is one of the reasons why market capitalisation is losing relevance. If there are only one or two companies in each sector that are making a meaningful amount of money — in that case, the distinction between the large and midcap is a function of the size of the respective business segment that there are operating in and not so much in terms of the size of the company itself.

In terms of valuations, Mukherjee is of the view that the valuations in the mid-cap space have run up ahead of large-cap and the margin of safety has shrunk. “We still remain in an uncertain world and in that kind of scenario small companies might not be able to withstand the second wave of uncertainty is still questionable,” he added.

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