Not whole mid, smallcap segment expensive; bullish on power sector, says Sandeep Bagla of TRUST Mutual Fund

livemint.com:

Sandeep Bagla, CEO of TRUST Mutual Fund says within mid-caps and small-caps, there are significant variations in valuations. He pointed out that the mid-cap and small-cap space will always be a stock pickers’ canvas. In an interview with Mint, Bagla talked about the current market structure and sectors he is positive about.

Edited excerpts: In my opinion, the markets have already factored in stability and continuity to some extent. In case the market senses a stable government, there is a good chance of a moderate pre-election rally as well. In general, markets do not like uncertainty of any kind.

If there is a hint of uncertainty, the market will try to adjust prices, considering how it might affect corporate earnings, P/E multiples, and so on. I am not an expert in politics; hence I won’t be able to predict what will unfold. However, markets favour stability and the elimination of uncertainty.

In the current market, it would be prudent to stick to one’s asset allocation and increase exposure accordingly. While considering defensives for stability, one should not exclusively concentrate on them; diversification across sectors remains crucial. Some defensive sectors like utilities or healthcare could offer stability, while growth opportunities could come from sectors like IT and consumer durables.

Some mid and small-cap stocks may have run a bit too far, but that need not mean that the whole segment is expensive. Within mid-caps and small-caps, there are significant variations in valuations. Mid-cap and small-cap space will always be a stock pickers’ canvas and there are a couple of reasons for this.