Key Points
While there is exuberance in some pockets of mid and smallcaps, there are enough and more opportunities within the smallcap space where valuations are reasonable and may continue to generate alpha returns even from hereon, Bharadia said..
However, if one looks at the valuations, Nifty is trading at 21x P/E which is closer to its long term averages whereas midcap and smallcap indices are trading at 22.4x and 26.24x, respectively, which is well below their historical averages...
On one side, Indias domestic demographics and strong macroeconomic factors are playing out and on the other side, despite a slowing global economy, Indias growing share in global merchandise trade due to China+1 and Europe+1, puts it in a sweet spot vis--vis its EM peers...
We strongly believe that the forefront winners would be good quality businesses who are poised for high growth, have pristine balance sheets, run by great promoters and are available at reasonable valuations...
Given Indias large demographics and growing opportunities in the manufacturing space, thanks to Make in India, PLI, China+1, Europe+1 and similar other structural changes, consumption and manufacturing are multi-year themes to be played out and are no longer dependent on election outcomes...
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