Good time to take bold bets in quality smallcaps: Madhu Kela

NEW DELHI: Market veteran Madhu Kela feels the bull market is set to make a comeback on Dalal Street, but with a lag.

Kela, who is sitting on some cash and has been defensive in last nine months, said it is time to enter the market selectively.

In an interview with ETNOW, Kela said wealth destruction seen in the smaller companies facing debt issues was ‘abnormal.’


“I believe it is time to take bold bets in quality smallcaps,” he said.

Smallcap and midcap stocks will surely outperform over the next 3-5 years, he said while advising investors to accumulate stocks in the next 3-4 months.

He said he has seen similar cycles playing out in the past as well. “I see enough choices now, other than the index stocks, which will make good money,” he said.

Acknowledging that he made a few mistakes in the past two years, Kela said he had excessive faith in some businesses, where he underestimated promoter leverage.

“I have learnt a lot in the last two years,” he said.

Kela blamed bad capital allocation for the wealth destruction seen in last two years. He noted that a few stocks still made new highs due to good corporate governance and earnings trajectory.

City Union Bank, VST Industries, Mahindra Lifespace and Can Fin Homes are among the midcaps that have outperformed their bigger peers in last two years.

Data showed the BSE Smallcap index has dropped 25 per cent in last two years. On a year-to-date basis, it is down 13 per cent compared with a 6.5 per cent rise in BSE Sensex. The Midcap index is down 14 per cent in last two years, and 10 per cent year-to-date.