Asset managers worried about the steep run-up in mid-, small-cap space
Published On: Friday, July 2, 2021 | By: Team KnowMyStock
The mid and small-cap indices, which underperformed large-caps until early 2020, have covered lost ground, gaining 73 percent and 104 percent, respectively, in the last year. “The economy is likely to see a cyclical upturn which makes us feel that the outlook for the broader market is likely to be good going forward. However, the euphoric rise in many poor-quality small-cap names driven by higher retail participation is a cause for concern,” say experts. On aggregate, the entire universe of Flexi cap schemes, which invest across market capitalisations, had 71.5 percent of their assets invested in large caps, 23.4 percent in mid-caps, and 5 percent in small caps as of May 31, data.
The steep rally in the mid and small cap space had made valuations uncomfortable, which is why the HDFC MF had lower exposure to such stocks in its portfolio. HDFC MF the second largest in the flexi cap category, had 14.6 per cent invested in midcaps and 7.4 per cent in small caps as of May 31, 2021.
Neelesh Surana, CIO, Mirae Asset Management believes that investors’ portfolio should be more skewed towards multicaps and large caps at this juncture and those overweight on midcaps should reduce their exposure.
Asset managers expect higher market volatility going forward given the US Federal Reserve’s stance on tapering. The global recovery is likely to be faster than that in India because of the impact of the second wave of the pandemic as well as rising prices on account of raw material inflation.
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