ETMarkets Fund Manager Talk: Valuations stretched, but still see lot of strength in mid/smallcap stocks: Viraj Gandhi, Samco MF

economictimes.indiatimes.com:

Strong rally in the broader market in the recent months has brought valuations closer to historical highs in a few pockets, but Samco Mutual Fund believes there is more steam left in this momentum.
“Thinking from the perspective of a momentum or relative strength investing, we see a lot of strength in the small and mid-cap space. One should hold on to them till the party is going on, but with much more caution and tighter stops,” said Viraj Gandhi, CEO of Samco Mutual Fund. Edited excerpts:

The latest AMFI data showed that the pace of inflows has slowed down in midcap and small-cap funds. Is this a sign of fatigue?
The pace is still intact in the midcap funds as in September, it was the second highest in the last 12 months. Small-cap funds also saw a decent inflow of about Rs 2,700 crore.

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Almost all experts on the Street are cautioning investors about the lower margin of safety in this space, which could be the reason for a lower inflow compared to previous months.
Looking at the small and mid-cap indices, they still are relatively stronger than the large cap indices. So, currently there are no signs of any major weakness in this space.

How comfortable are you from a valuation perspective in the midcap and Small-cap space? Is it time to switch to largecaps?
Valuations do seem stretched for the midcap and smallcap space and valuation ratios are at or near all-time highs from a historical perspective.

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