As Nifty hit a new milestone, is this the time for investors to book profit? 3 experts answer

Experts suggest to book profits in small and mid-caps and to stay invested in the large caps

Vimal Chander Joshi, MintGenie Team
Published13 Sep 2023, 09:03 AM IST
Small and mid-cap stocks are headed for a steep correction, warn experts
Small and mid-cap stocks are headed for a steep correction, warn experts

As the Nifty 50 kissed a new high of 20,000 on Monday after having surged by nearly 16 percent in the past six months, the current bull run is being touted as ‘irrational exuberance’ by the sceptics, and a ‘new normal’ by the optimists.

Some experts believe that the bulls will continue their run until mid-next year in the run up to general elections, while the cautious investors are of the view that the rally has already factored in the outcome of Lok Sabha polls.

Regardless of which school of thought you buy; the chances are that you — too — are riding the wave if you have some exposure to equity.

The ongoing bull run has wooed a number of retail investors who have invested large sums of their portfolio in equity via mutual funds.

Total inflows to equity funds in August were highest in the past five months, and were greater than the cumulative inflows of past three months.

“Economic growth is expected to improve, and the markets are expected to grow. The overall outlook for the mutual fund industry in India continues to be positive,” said NS Venkatesh, CEO, AMFI while sharing his thoughts on the spike in equity funds inflow.

What should investors do now?

The experts believe that the large cap stocks will continue to rise but the small and mid caps would face a steep correction in the time to come.

Retail investors, therefore, are advised to stay invested in the Nifty 50 stocks and are recommended to do profit booking in their small and mid-cap allocation.

Chokkalingam G, Founder and Head of Research, Equinomics Research, says, “Investors should stay invested in the quality stocks. Sensex and Nifty are not likely to fall badly anytime soon, but there could be 2-3 percent correction. But it is the time for small and mid-caps to correct by 10-15 percent, so it is advisable to do profit-booking in these categories. Depending on the oil price (if it hits $100 a barrel) and the outcome of state elections (against the expectations), the market indices could fall by 5 percent. But there is no expectation of major correction.”

While sharing a similar viewpoint, Deepak Gagrani, Founder of Madhuban Finvest, says, “As an investor, it's essential to focus on the current rally between large caps and midcap and small cap segments. While valuations of large caps offer comfort, the massive run-up in midcap and small cap segments may pose unfavourable risk-reward for investors. One can consider shifting to large cap funds or flexi-cap funds with large cap bias.”

“Alternatively, asset allocation funds would be a more desirable choice for investors closer to their investment goals. Investors should continue their staggered investments in equities,” he adds.

Jaykrishna Gandhi, Head of Business Development, Institutional Equities, Emkay Global Financial Services, echoes similar sentiments when he says, “Frontline stocks still remain attractive, we can see some correction in mid and small caps which have materially outperformed the frontline indices which has resulted in above average PE expansion”.

To sum up, it is expected from investors to stay cautious with regards to small and mid cap stocks and reallocate their portfolio in favour of large caps.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before taking any investment decisions.

 

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First Published:13 Sep 2023, 09:03 AM IST
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