Scope for PE expansion very high in mid cap stocks: Pramerica MF

In a chat with ET Now, Vijai Mantri, MD & CEO, Pramerica MF, shares his views on the small and mid cap stocks. Excerpt:
ET Now: December has seen a strong momentum infused rally in small and midcap stocks. Is that dangerous? What does that mean for the midcap space and for the market health?

Vijai Mantri: When a particular segment of the market has started going up — whether it is a sector or a capitalising sector — then there is a tendency of speculative segment of the market to start anticipate what would happen next. Hence, they also start picking up a not-so-great idea.

Therefore, there is a danger that some stocks, which has run ahead of the steam or the fundamentals, may not be of quality companies; if the investor start picking those companies and start going even down, then there is a real danger that they may lose their capital by 20-30 per cent.

Having said that, it is important to be very quality conscious about mid and small cap segment. Compared to large cap segment, it is much more important that one need to take the advise of a professional manager about mid and a small cap stocks.

Our concern for the mid and small cap stocks is that it will be a great story for at least couple of years. However, if the investor start going and picking up the momentum stock, then there is a danger of his losing the capital and repeating the mistake the investor made in 2000 and perhaps 2008.

Therefore, one needs to go through the professional manager but the real scope of PE expansion is actually in mid and small cap segment.