Midcaps and small caps valuations are a bit overstretched: Sachin Shah

economictimes.indiatimes.com:

«I think the trend for the Q1 will also be decent and the capex cycle seems to be very strong,» says Sachin Shah, Emkay Investment Managers.We are actually just in the phase of the denial. Markets are just chugging along almost 19,650. Which side of the camp are you? Are you getting into a frothy zone now or are you on the camp that the rally may not stall in a hurry this time and even if it does, the correction would be much more shallower because they come on strong fundamental factors. Yes, markets have been going up against most of the people's expectations, but I am sure it is a pleasant surprise for everyone.

The quarter that just got over, I mean, in fact, this current financial year itself, since April till July now I think who would have thought at the end of March, early April that markets would give this kind of returns because today Nifty is already up 10% to 12% in this financial year and the midcap and the small cap indices will be up more than 20%. So, clearly it is a surprise, but I would like to believe it is a pleasant surprise for all of us who have been into equity markets and we are very happy to see this strong rebound I would say.

In terms of the underlying factors, clearly we all understand the kind of the outlook that we all have for Indian economy, a lot of high frequency indicators also at this point in time are showing decent signs whether it is a freight volumes, whether it is e-way bills, whether it is some of the other data points. So all of that seems to be fairly decent.

But I think the only challenge probably at this point in time are the valuations. In terms of valuations, maybe market is maybe slightly running ahead of time and that could be the only concern if at all anything.