Small and mid caps expensive; stagger your investment, says Quantum MF

Fund managers at Quantum Mutual Fund, that follows a value style of investing, believe the Indian markets are trading at a premium relative to its history and mid and small caps are expensive. They believe retail investors should stagger their investments to achieve the best results from their equity allocations. "The benchmark BSE S&P Sensex is trading close to 22.6x FY22 consensus earnings, while the long-term average PE is close to 18x," says Sorbh Gupta, Fund Manager, Quantum Mutual Fund.

Sorbh believes the markets are already factoring in improvement in economic data and pent-up demand while the global markets too remained resilient despite Fed commentary suggesting that rising inflation can result in rate hikes in 2023. The fund house is on the lookout for pockets of undervaluation to create a portfolio with a reasonable margin of safety with a long-term perspective. It believes that cyclicals like financials, commodities, and consumer discretionary have the potential to see earning upgrades, in a typical economic recovery environment., while technology stocks are a good play on the global economic recovery. The fund manager believes business case for technology has strengthened during the pandemic as technology spends have become part of business continuity plans for corporates across the globe.

Its flagship scheme Quantum Long Term Equity Fund has cash holding of approximately 8.5% at the end of June. It has assets of Rs 887 crore with its top holdings being HDFC Ltd, Infosys and HDFC Bank and has returned 60% over the last one year.