The Bombay Stock Exchange, right, stands on Dalal Street. (Photographer: Vivek Prakash/Bloomberg)

Rout In Mid- And Small Caps Will Not Last For Long, Franklin Templeton India Says

The rout in mid- and small cap stocks cannot last for too long, according to Franklin Templeton India.

While the NSE Nifty 50 Index has managed a gain of 1.8 percent so far in 2019, slightly extending a near 40 percent three-year rally, smaller stocks continue to reel. The Nifty Midcap 100 Index declined 14.2 percent while the Nifty Smallcap 100 Index fell 26.60 percent in the last 12 months.

“The bipolarity of where few stocks at supernormal valuations and rest of the market grinding to new lows can't continue forever,” Anand Radhakrishnan, chief investment officer of Franklin Templeton India said in an interview to BloombergQuint.

Rather than investing in overvalued stocks, Radhakrishnan advised investors to “actively look for bargains” in large-cap or mid-cap stocks whose valuations have room to accommodate near-term growth challenges.

Other Key Highlights:

On Global Macro Conditions And Their Impact On India:

  • Global interest rates have become softer and crude oil prices have moderated. These factors are favorable for an emerging market like India.
  • India is placed in a much better situation currently than in the last six-nine months.
  • The only hump for Indian markets: political transition or election-related issues.

On NBFC Crisis:

  • Need to wait and watch the non-banking companies’ handling of turbulent times to separate the wheat from the chaff.

On Auto Space:

  • Hold a constructive view.
  • The sector will deliver good returns over a period of time.
  • Looking to invest in two-wheelers and commercial vehicles segment currently where we see good value.

Interim Budget 2019:

  • The middle class section may spend more on consumer durables. They may even take the risk and buy a new house.
  • Increase in rural income will result in purchase of more branded goods and consumer staples.

Watch the full interview here: