Largecaps showing better risk-reward potential compared to midcaps and smallcaps: Harshad Patwardhan
«We clearly believe that at this point of time, if you look at risk reward, largecap is where risk reward looks far better compared to midcaps and smallcaps,» says Harshad Patwardhan, CIO, Union MF.
We were speaking with our technical expert earlier and he is talking about 26,000 on the index as soon as next week. What about the top of the year because at 24,000 we thought that perhaps fundamentals are not running as fast as the valuations, 25,000 same questions being asked about valuations, but it just seems like it is all about liquidity, momentum, and flows.
Harshad Patwardhan: Absolutely right, fundamentals do assert themselves over medium to long term. But in the near term, clearly the liquidity or the demand-supply tends to overwhelm fundamentals. However, I must point out that medium- to long-term fundamentals of Indian economy, corporate sector look very-very robust. So, to that extent, yes, sometimes the valuations will run ahead of themselves. Stocks and sectors will run ahead of themselves but so long as the medium- to long-term trajectory you are sure of, these things tend to happen. So, I do not really worry too much about it. Having said that, we clearly believe that at this point of time, if you look at risk reward, largecap is where risk reward looks far better compared to midcaps and smallcaps.
In largecap, the risk reward looks much more interesting, but in the largecap also financials are one space where valuations are quite attractive, yet you are underweight on financials. Why so?
Harshad
