Which market theme is a cracker but unlikely to last? Radhika Gupta, Nilesh Shah and 8 others answer

From the IPO frenzy and AI buzz to smallcap valuations and semiconductor stocks, 10 fund managers identify the market trends that may lose their shine sooner than investors expect.
Here is what these 10 fund managers decode, as reported by ETWealth.

Some small- and mid-cap stocks at current valuations. They have already run hard. Unless they deliver extremely optimistic earnings growth, the return trajectory of the recent past is unlikely to continue. Low-floating stocks and pure momentum stories look especially fragile. The cracker looks bright for a few seconds, then only smoke remains.

The IPO craze resembles a Diwali firecracker: plenty of noise, excitement and short-term sparkle. Like a flashy cracker, it can grab attention but fade quickly. Investors are better off focusing on fundamentally strong companies than getting carried away by listing-day excitement and market buzz.

Themes driven by recent returns often resemble crackers, dazzling for a moment but quick to fade. Investors should be wary of chasing momentum alone. Lasting wealth is usually created through discipline, diversification and patience.

Like a flashy Diwali firecracker, themes driven more by narrative than fundamentals fade quickly. Some new-age technology-platform businesses may offer promise, but investors should focus on sustainable economics, cash flows and competitive strengths rather than market hype.

I would be wary of businesses valued mainly for their artificial intelligence or digital-infrastructure links.

While Contract Development & Manufacturing Organisation (CDMO) and Electronics Manufacturing Services (EMS) offer attractive growth opportunities, investors should look beyond the festive excitement. The sectors can do well, but individual company outcomes may vary widely based on execution, technology capabilities and return profiles.

Semiconductors, AI, private sector defence and electronics manufacturing look flashy, attracting plenty of attention and FOMO (fear of missing out). Investors should look beyond the sparkle, focus on valuations and be selective in stock picking.

The founder and fund manager at Helios Capital believes that the recent IT (information technology) rally in large caps.

Some small- and mid-cap IPOs resemble a Diwali cracker: exciting at launch but often short-lived.

Any theme driven more by narrative than earnings can be risky. Themes that are driven more by narratives than fundamentals can often resemble Diwali crackers: exciting for a brief period but short-lived. When valuations run significantly ahead of earnings growth and business fundamentals, risks tend to increase. Chasing momentum or concentrating on thematic bets can be detrimental to long-term wealth creation.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)