Consumer durables will probably lag overall market; play realty via HFCs: Anand Tandon
Anand Tandon, Independent Analyst, says “in India, housing still remains something which is fairly attractive. To a large extent, it is a function of how much funding is available and while housing finance companies are an easier way to play realty in a more sustainable way, you could have bought some of the real estate companies. The way to play the sector is to buy housing finance companies and that still remains a good trade.”
The Association of Mutual Funds in India has come out with a circular to the trustees of the mutual funds to protect interest of investors of smallcap and midcap schemes, indirectly cautioning them a bit with respect to the kind of froth that we are seeing in the smallcap, midcap space. Would you concur with the view that smallcaps are getting a lot more headier?
Anand Tandon: Smallcaps have been valued higher than midcaps and largecaps for quite a while now.
And the biggest risk that is there in smallcap is the simple fact that if and when the market turns, it is extremely difficult to get out of it. Not only do they become illiquid, but many of them have dubious corporate governance.
The earnings also start to vanish as the market comes down. So, in both cases, you need to be careful.
That said, mutual fund managers are likely to be quite good in terms of being able to figuring out which are the ones that are worthy of investment. So, I would think that while one should be putting less weight in the smallcap, it is not as if you are likely to be owning a portfolio which is of poor quality.
