Not the time to buy small and midcaps outright; be selective: Aniruddha Sarkar

‘We have to be very selective in the sectors and within the sectors, pick the companies which have strong visibility of earnings over the next 12 to 18 months,” says Aniruddha Sarkar, CIO & Portfolio Manager, Quest Investment Advisors

What are your thoughts on the midcaps and smallcaps? Does one have to be wary about this sector or do you see adequate correction happening and a case for cherry picking?
I do not try to segregate between the large, mid and small caps because we might find expensive valuations even in large cap space and we might find attractive valuations even in the mid and smallcap space. We look at individual sectors and within those sectors we try to find out which are the stocks that give me comfort for both value and earnings growth.

Having said that, in the last couple of months’ correction in the market, we found several midcap and small cap companies at very good valuation levels. Among my portfolio companies – be it auto and auto ancillary, specialty chemicals and IT – many of these companies the valuations have become very attractive and earnings at the same time are poised to grow anywhere between 18% and 24%.


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So definitely, on the valuation front, many of these companies have become very attractive but one needs to be very careful. It is not a time to go and buy any mid and small cap outright. We have to be very selective in the sectors and within the sectors, pick the companies which have strong visibility of earnings over the next 12 to 18 months.