“In the largecap space, the market has not rallied as much as we would want it to, given that the small and midcaps have rallied around 35% odd, 35-36%. There will be pockets where you need to book out and there will be enough opportunities and more in the market to get into areas where you think the valuations are reasonable.”
The Sensex and Nifty 50 gained over 2 percent last week, reaching at a kissing distance to their all-time highs. The gains came despite a spike in crude prices, a rise in the dollar index, a surge in yields on the US 10-year bonds, and continuous selling by FIIs
Market sentiment is quite exuberant based on steep increase in the prices of many midcap and smallcap stocks, large inflows into midcap and smallcap mutual funds, and huge number of new retail participants in the midcap and smallcap funds, Kotak said.
“The valuations of the midcaps and smallcaps from a trailing earnings perspective are more or less reaching the valuations of largecaps and there is no spread between a midcap and smallcap over largecaps broadly. The way cyclical recovery is happening, earnings growth in some of these midcaps and smallcaps will also be far superior to largecaps.”
"Largecaps Reliance, Apollo Hospital, and ICICI have great potential for growth and it is time to get overweight on these stocks. Tata Tele and JP Power are the midcap dark horse opportunities. Midcaps may be frothy but there is still value to be found. The Nifty is likely to reach 20,000 this month. Underlying positive global cues and strong macroeconomic fundamentals are driving factors."