‘Rally in mid-, small-cap segments led to valuation premium’
NEW DELHI : The sharp rally in the mid- and small-cap segments has led to a valuation premium developing in many companies, which could hamper return potential as markets take a breather. One of the reasons why the broader markets have outperformed is because the mid- and small-cap space is filled with high-quality companies which are able to scale businesses quickly, Shreyash Devalkar, head, equity, Axis Mutual Fund, said in an interview. Edited excerpts: How do you see rising crude prices and currency volatility impacting the Indian markets? The cyclicality of crude prices has historically roiled India’s economy, and by extension, its markets.
Over the last few years, however, policy changes, the adoption of market-linked prices, and a wider economic moat have reduced this impact to some extent. Today India’s service exports equal, if not exceed, the crude import bill. Favourable long-term contracts and strong geopolitical tailwinds have also stood the economy and the markets in good stead.
On currency, the valuation should be looked at cohesively rather than an absolute dollar-rupee value. In the natural course, currency variations are a result of interest rates and inflation differentials. From an India standpoint, a healthy forex balance, strong exp-orts, and policies promoting import substitution give us confidence that INR (Indian rupee) is likely to remain stable from a relative standpoint.
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