Smallcaps and midcaps may take centrestage: Pradeep Gupta

Continuing with their record-breaking spree, markets have been touching fresh highs lately. Positive sentiment and earnings growth are likely to keep the momentum going with an increased interest in mutual funds. Pradeep Gupta, co-founder and vice chairman, Anand Rathi in an interaction with Arpita Saxena.

Midcaps and smallcaps are now way ahead of large caps as against earlier when they were available at 40% discount of large caps. How do you see mid-cap and small-cap funds performing?

I am expecting good economic growth due to reasons like – change in regulatory environment, numerous reforms being implemented, investments is expected to start flowing in which will enable in creating further demand. I feel mid-cap and small-cap funds will also perform along with large-cap funds, as the growth is going to be in sectors where the former will get benefited. The mid-cap and small- cap sector should see higher growth as in percentage terms they are bound to get a higher benefit due to their size.

With factors like a stronger rupee, FII inflows, etc, the market is pricing in double-digit growth. How do you think the scenario will play out for mutual funds?

Positive sentiment and earnings growth will continue to drive investments in the markets. At the moment, equity as an asset class is more attractive than any of its peers. Hence, the momentum will increase in mutual funds.

Markets are at an all-time high with both Sensex and Nifty scaling new heights. Do you see the momentum continuing in FY18?

We believe that the momentum will continue for the next three-five years and economic growth will start reflecting somewhere in this financial year; which will be visible via growth from earnings. This phenomenon is already factored in to a certain extent in market valuations. I believe earnings growth of 15% - 20% will enable to keep the momentum going.

What factors both global and domestic can prove to be potentially hazardous for the current momentum of the equity markets?

Globally, there persists short-term volatility surrounding geo-political concerns, protectionist policies, inflationary issues, sluggish growth, among others. Domestically, delay in implementing various policies being set out by the government, poor monsoon and any major hiccups in implementing GST.

Overseas investors are bullish on the Indian markets currently. Do you see the sentiment strengthening?

No, I don’t see the enthusiasm in Indian markets being faded out. As I have mentioned earlier also, global growth is expected to get the push from the emerging economies. And, India, amongst the emerging economies stands out clearly with regard to its structural growth. The reforms process which have been initiated in the past three years will start yielding the benefits, and place the entire country on a stronger place.

What is your trading advice for both short-term and long-term investors at this time? How much room should investors keep for changing portfolio, considering short-term fluctuations?

For an investor, I would suggest them to create a detailed strategy and start investing as per the same. Short-term investor needs to be cautious. For long-term investors, short-term fluctuations should not play a major role in his overall investment plan. Factors such as market liquidity, sentiment and global factors are what can sway the market in short term.

Smart investor should never fall in a trap of diverting from the originally laid-down plan; one can review the initial laid-down plan and re-balance their portfolio, but never change the entire detailed thought-out plan only due to short-term fluctuations.

Create a well thought-out diversified strategy, keeping good enough allocation into equities.

The Nifty band has stretched past 9600. Do you see any range for either Nifty or the Sensex going ahead?

As of now, Nifty has already crossed 9500 level. It is difficult to predict the behaviour of markets, specifically in the short term with positive sentiment and ample liquidity. I feel that the markets might consolidate for some time in short term but on a longer-term scenario, it would surely gain momentum and improve further.