INSUBCONTINENT EXCLUSIVE:
By DK AggarwalOver the past few months, Indian stock markets have slipped from their earlier buoyant levels
They have been impacted by a host of domestic issues as well as global headwinds such as an uncertain trade backdrop, weak global growth
outlook and Fed's rate trajectory, to name a few
A spike in US bond yields and strengthening US dollar have led to a selloff in emerging markets, including India
Both small and midcaps suffered a double digit drop in 2018 and the trend seems to have continued in 2019 as well
The steep slide in small and midcap stocks came after Sebi announced reclassification of mutual funds.
Notably, valuations in certain
pockets of midcaps and smallcaps had been stretched as against largecaps after a marathon rally for nearly five years
Actually, sustained fund flows had pushed up their valuations to unjustifiable levels
Also, there were issues of corporate governance and resignation of auditors in some companies that hit investor sentiment
Uncertainty surrounding upcoming elections, global geopolitical tensions, a weakening rupee, rising oil prices, the current account deficit,
a tumbling rupee, and a rout in NBFC shares are causing the loss of faith in midcap and smallcap stocks
Mutual funds, especially the midcap ones, which attracted huge inflows earlier, saw widespread redemption pressure.
The interim Budget as
The Budget went that extra mile for rural households and the middle class alike, with an aim to increase their disposable income
With the macro environment becoming more challenging, investors have cut down their exposure to the market while a few smart investors are
pouring money into defensive stocks, especially largecaps
Large companies with excess capacity and pricing power are doing very well
Going ahead, market will continue to remain volatile ahead of the upcoming general elections and investors will equally keep a close watch
Though the recent correction has removed some of the froth from the midcap space, investing in quality stocks is worthwhile
It is essential for investors to revisit their investment strategy and the portfolio they hold
They need to be very selective and should keep a close watch on the business outlook, management quality, inherent profitability and last
not the least, valuation comfort
Chairman Managing Director,SMC Investments and Advisors Limited
