Vinay Jaising, MD, JM Financial Services, says “we are still a lot more comfortable in a lot of mid and smallcap names wherein we are seeing earnings visibility leading to earnings growth drivers. If earlier you had an EPS of a company which was X and that is going up by 20 to 25%, your new PE may not be as high as what you are expecting. So for us, it is all about bottom-up fishing and looking at stocks where valuations are not expensive.
Is valuation becoming a bit of an issue now for your stock picking process because I am sure the flows are good and plus your existing portfolio would also be expanding due to market going higher? How are you dealing with the challenge of rising valuations?
Vinay Jaising: As you put it, valuations are close to peak for many stocks. People say largecap valuations are a little cheaper than what they were in the past or on a relative basis, you know, probably cheaper. If I would take the Nifty50 and take the seven largecap stocks which grew, I would say, at much lower rates last year of 7-8%, rest of the 43 stocks grew by over 30%. So valuations all over are an issue.
What you need to look at is bottom-up stock picking where you are comfortable. We are still a lot more comfortable in a lot of mid and smallcap names wherein we are seeing earnings visibility leading to earnings growth drivers. If earlier you had an EPS of a company which was X and that is going up by 20 to 25%, your new PE may not be as high as what you are expecting. So
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