“In the midcap space, one can straightaway look at the so-called unlock plays, sectors which had been out of favour specifically with reference to hospitality and many of them are midcap stocks and they are back in favour. These include entertainment, construction and capital goods and auto ancillaries sectors, ” says Sanjay Sinha, Founder, Citrus Advisors.
Did you manage to reduce some of the midcaps from your portfolio before the 30-40% decline? What are you aiming at right now?
The correction in the midcap stocks has not been happening only in the last three-four months. It has actually been happening over the last full calendar year because contrary to what we saw in terms of the Nifty midcap index movement, individual midcap stocks had corrected from their 52-week high by as much as 25%.
We did an analysis ourselves and we found that as many as about 60% of the midcap stocks had corrected by 20% or more from their 52-week highs even before the index corrected. Therefore midcaps are more a function of bottom up opportunities that one needs to enter and exit. So, it has not been an across-the-board reduction in midcaps, but given the last phase of the rally that we have seen over the last three weeks, where we have seen a frenzy in a large number of penny stocks and small cap stocks. Of course, the caution level has been higher but I will not write off midcaps completely. There are still opportunities in midcaps.
What are your structural calls for the next three to five year?
If 2022 is going to be a year which will challenge the equity return, at least for the next four years, we will probably have one of the most beautiful years in terms of the rally in the Indian equity markets. This is one rally in which the larger population of India will be able to participate because the demat accounts are now in excess of 7 crore. More and more people are now participating in the equity markets and are also to some extent familiar with the risk and reward opportunity in equity.
The equity market rally and the ability of people to translate that rally into their wealth creation is something that is happening. They need to focus on capturing the one thing which has turned out to be a promising opportunity as far as India is concerned. The IT sector has adapted to all the changes which have happened globally either in terms of currency or in terms of business opportunity or in terms of even the side effects of the pandemic. The IT pocket will be one place where people should look at opportunities and within IT, a lot of …….