look news india
Ahmedabad: India's leading asset managers say that although the bubble-like situation in the smallcap and midcap segments is limited to a few sectors, regulatory scrutiny and scrutiny could continue to create uncertainty in the sector. Investors in small-cap stocks are reducing risk through both MFs and direct options.
According to asset managers, most of the clients have reduced investments in smallcaps. Also the portfolio has been shifted towards large caps. Due to the year-long boom, smallcap and midcap sectors have earned good profits.
The risks have increased due to increased regulatory strictness and slowing profit growth in the smallcap segment. Small and midcap valuations are currently close to largecaps. This problem is not limited to smallcap and midcap only. The biggest factor relates to increased regulatory scrutiny on the listed sector. This could lead to long-term volatility and investors need to be prepared for this.
The 12 month PE ratio of Nifty Smallcap 100 has fallen to 25 times. It increased to 28 times in February. The PE ratio has declined after about 11 percent weakness in the index. Nifty-50 index is trading at 22.8 times PE ratio.
Despite index-level strength, some sectors such as specialty chemicals, media and internet software and services underperformed in the smallcap and midcap indices. The recent decline has given investors an opportunity to include good quality stocks in their portfolio.