The beaten-down broader markets will indeed pick up pace in order for the mean reversion principle to pan out. However, considering the slow growth at the bottom of the pyramid, it would be extremely aggressive to hope for the mid and small caps to outperform largecaps, Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote, said in an exclusive interview to Moneycontrol’s Sunil Shankar Matkar.
Q: Global, as well as domestic, cues have started favouring the bulls, and the market ended at a three-month closing high. Does it mean the market has priced in most of the negative news and started making real northward journey? Will it hit record highs by December?
The markets have indeed priced in all the negatives and is ready to witness a virtuous cycle wherein sentiment improvements will lead to consumption spending and later capex spending by corporates, which will take the growth back to 7 percent plus by 2020. By December, markets have every likelihood of reaching newer highs.
Q: FIIs seem to have resumed buying in India as they are net buyers throughout this week. Does it mean the new bull run has begun?
The initial evidence seems to suggest that the new bull run has begun and will slowly increase its breadth and width taking along with itself the mid and smallcaps too. However, if too much optimism returns by means of frenzy in IPOs and aggressive disinvestment activities, the bourses will be pressurised.
Q: Do you think the midcaps and smallcaps will outperform largecaps in 2020 after two-year underperformance? What are your thoughts?
Outperforming largecaps would be a far-fetched 2020 dream considering the massive divergence between largcaps and mid and small caps. The beaten-down broader markets will indeed pick up pace in order for the mean reversion principle to pan out. However, considering the slow growth at the bottom of the pyramid, it would be extremely aggressive to hope for the mid and small caps to outperform largecaps.
Q: What are your top five picks for the next one year which could give double digit return?
Instead of picking standalone stocks it would be better to pick baskets of stocks which have a safety net and diversification to mitigate the risks. Top MNCs India lite basket which consists of stocks such as Hindustan Unilever, Nestle, United Spirits, Colgate, Abbott India and a few more would be a good pick for investors.
Q: Considering the market behaviour, do you think the government will announce more new measures, or will the RBI cut the repo rate further in coming months? What is the market pricing in currently?
Currently, Mr. Market is pricing in a 25bps further cut from the RBI in the coming months which is already priced in. And, considering the retail inflation numbers, I feel this will be the RBI’s stance in the next MPC meet. Apart from this, the introduction of the scrappage policy could be one initiative to boost the auto space in India. This would be a phenomenal stance, if and when it comes, to refuel the growth in this industry. GST cuts and disinvestment activities should also be on the Government’s agenda by Budget 2020.
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