Christy Mathai predicts further market correction, warns of potential pain in small and mid-caps
«Now, one could argue that post COVID we have seen fairly good growth in the mid and small pockets and which is possibly now normalising, but also the flows have been extremely strong in that particular segment and if you were to look at very long-term returns and valuation charts, we can clearly see that these tend to mean revert and our sense is that mean reversion could even sharper if the flows were at risk at some point in time,» says Christy Mathai, Quantum AMC.
Firstly, help us with your take on the markets going under the correction mode and do you believe that the bottom could be near, we might be hitting the bottom anytime soon or do you believe that the pain can elongate for a little longer time than now?
Christy Mathai: So, our sense of the markets is let us say from the peak of the market, Sensex would have fallen by about 12% near about and if you look at some of the broader indices, the fall could be much higher. So, if you were to look at the very large universe of the stocks which is listed today, almost 70% of them would have fallen by about 30% or more from their peaks. So, it looks like some correction has gone in in that broader markets but if you were to just look at the valuation standpoint, let us say a midcap index versus largecap index one year forward, so that number is still at a premium of 37%.
Now, one could argue that post COVID we have seen fairly good growth in the mid and small pockets and which is possibly now normalising, but also the flows have been extremely strong in that
