We are seeing greater value and comfort in largecaps: Ashi Anand

economictimes.indiatimes.com:

Ashi Anand, CIO-IME-branded strategies, Valcreate Investment Managers LLP, says “a lot of froth around the IPO market clearly is an area of concern. One can also see this around certain themes which are more popular. So, you start seeing valuations having a disconnect with underlying fundamentals starting to really factor in a lot of the growth and valuations of companies without very strong cash flows, without healthy ROEs and balance sheets not as great starting to command 50, 60, 70 PE upward. All these are very clearly signs of froth being built up in certain areas.”

Do you think a lot of spaces are getting overbought, overvalued now and one needs to have a lot of caution while making fresh investments into any of those verticals?
I would think so. In the small and midcap space, we have seen very sharp run-ups especially in anything related to capital goods, defence and railways; some of these have started becoming extremely expensive. We are starting to counter a lot of the optimism around some of these themes. In some cases, actual implementation and actual growth around capital goods will take some more time. We are factoring in all of this positivity up front and seeing this in this space but across the range, we are more concerned around mid and smallcaps compared to the largecap space. We are seeing greater value and greater comfort in largecaps. That is broadly the way we are seeing the market.

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What are the signs you look for? Is it valuations alone? Is it the way