Correction in midcap, smallcap stocks an entry opportunity; TVS, Zomato best picks among ‘fallen angels’: Emkay Global

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Also Read: This is the reason why midcaps and smallcaps may consolidate in medium-term Sen expects the market to rebound in 3-6 months when SMIDs would start to outperform again and the ‘hide in large-caps’ trade would unwind. He sees this as a ‘buy-the-dip’ correction, with the only caveat being to avoid SMID stocks with elevated valuations. “We believe the correction in March has been due to frothy valuations and worries about liquidity in SMID funds and stocks.

The moderate headline correction hides a long tail of stocks that have taken it on the chin. It is not the worst of post-Covid corrections, but the speed has been disrupting. Energy, real estate, and materials were key underperformers, with the first two driven by mean reversion," Sen said in a note.

He targets Nifty at 24,000 with the overall strategy stance of buy on dips being unchanged. The brokerage firm prefers smallcap and midcap stocks, given bottom-up logic. The overweight sectors are consumer discretionary, materials, and industrials; and the underweight sectors are financials, IT, and FMCG.

Also Read: Jim Rogers bullish on India, advises investing in Indian equities to be rich “The best picks from ‘fallen angels’ in our model portfolio are Ambuja Cements, TVS Motor Company, and Zomato. We also see this as an entry opportunity for our small-cap picks, all of which have corrected sharply," Sen said. He believes there are multiple triggers for the bounce back in 1-2 quarters, such as an expected NDA victory in the upcoming Lok Sabha elections 2024, the first reform-oriented budget of the new government and monetary easing from the US Federal Reserve and the Reserve Bank of India (RBI).