In the longer term, investing in selective quality mid and smallcaps names, which fall in the emerging sectors or segments of the economy, are always the best way to generate alpha, believes Madanagopal Ramu, fund manager and head — equity atSundaram Alternate Assets, who oversees more than Rs 7500 crore worth of assets.
Ramu is of the view that the market is overestimating the earnings growth momentum for companies in the mid- and smallcap segment, which reflects in the rally seen this year.
“In many of these companies which are part of the mid and smallcap indices, earnings momentum are cyclical and not structural, so it runs out of steam pretty quickly. Therefore, being selective is key to sustain long term performance,” Ramu said in an interview with ETMarkets. Edited excerpts:
How has the year 2023 been for the funds managed by you? Madanagopal Ramu: It has been a mixed year, we saw a recovery and our funds performed in line with the market for most of the year, but alpha creation was challenging.
Benchmark indices, supported by flows, did well with the support of value stocks outperforming meaningfully compared to growth stocks.
Some of our picks in mid and small cap space delivered stellar returns and it helped our Sundaram Emerging Leadership Fund (S.E.L.F.) portfolio to make a good recovery in the last 3 months.
Our calls in the space of online ecommerce, financials, power, and consumer discretionary have helped us recover in the last 3 months. Our 5-year alpha