Market to be in consolidation phase over next 1-2 quarters: Mahesh Nandurkar

Midcaps: After dream run in midcap smallcap index during Samvat 2079 outperforming large cap index, while valuations may have become expensive and analysts now expect large caps to gain. Midcap IT stocks may still outperform large caps. Ashoka Buidcon, Colgate palmolive are amongst analyst picks.

In an interview, Kotak Institutional Equities’ CEO and co-head Pratik Gupta said the market will continue to consolidate around the current levels for the next few months and there is no major catalyst for a sharp rally or a sustained correction.

Q4 earnings will start coming out in mid-April and Indian markets are expected to see some rally. Rahul Shah, VP-Equity Advisory at MOFSL, believes that even though Indian markets tend to underperform when a global problem arises, Indian markets outperformed global markets last year and continue to trade at a premium. While the IT sector might remain challenging in the short term, Shah believes that stocks that have fallen in the past year should be back on track in the coming quarters.

With global economic uncertainty persisting, and central banks around the world continuing to provide liquidity to the markets, it is expected that there will be positive returns for investors in the near future, even in the event of a correction. While there are still some risks to consider, such as regional banks in the US, overall, the global economy is doing well. Indian earnings are looking robust, and while valuations are becoming attractive, there is still scope for further compression.

Market has a strange habit of giving surprises on both sides, moving up when no one is expecting and news is bad all around. Falling when no one is expecting it to fall and there is good news all around. So, in today’s time when there is good news all around, right from higher GDP numbers to better GST collections and on micro front companies announcing more orders and even words like expansion of capacity coming back, instead of predicting the time when there will be a correction, just be ready for it. Ready by staying with large caps and that too with sectors and stocks where some tailwinds are emerging. This is not to say that there cannot be some underperformance in large cap space, but the fact is that over the long term these large caps not only create much more wealth but in a bearish phase, they tend to protect the wealth by falling less as compared to mid and small caps.

After a minor corrective phase, while the mid and small caps are once again in party mode, large caps have been lagging in a relative manner. But investing in not about a quarter or week, it is much more than them. If one looks at the long term, large caps are able to outperform and create wealth in a more sustainable manner. So probably a short phase of underperformance due to the fact that everyone is chasing short term performance due to recency bias might be an opportunity to look at some stocks with a long term perspective.

In a period where small-cap stocks underperformed significantly, leading to a situation where large investors were calculating their losses in their small-cap holdings, there would be a group of steadfast enthusiasts who continue to see potential in small caps. Investing in these stocks, even amidst turmoil, can be sensible for those prepared to maintain their investment for three to five years. However, it's crucial to recognize the distinction between high-quality and poor-quality businesses across the small, mid, and large-cap spectrums, as well as the difference between the intrinsic value of a stock and the overall value of the company. Certain niche small businesses may still generate significant returns over time if they are held long enough. On the other hand, if one's approach to small-cap investments is merely based on the absolute value of a stock with hopes of a tenfold increase, then it's a misconception. Stock market investing, whether in small, mid, or large caps, should not be driven by unrealistic expectations; otherwise, it leads to nothing but undue stress, rather than substantial returns.

The market capitalisation of BSE-listed firms have surged Rs 10,43,216.79 crore to Rs 2,62,37,776.13 crore in the last five trading sessions (March 29-April 6).

Despite global tensions and high oil prices, the market is holding up well. Positive results cab ve expected from companies like HUL, Nestle, and ITC. However, one must be cautious with the metals sector due to slowing global demand. However, there are question marks over IT sector's recovery and one should explore better growth opportunities.

India remains well positioned in the longer term, despite the short-term risk of capital outflows prompted by investors wishing to lock in gains, according to Jonathan Schiessl, deputy CIO of Westminster Asset Management. Schiessl believes that while there is a degree of exuberance in the market, this particular period of selling-off is simply driven by investors looking to cash in on profits. He stressed that India has outperformed China recently, and risk of a trade war between the two is not new.