While the Middle East conflict continues keeping the stock market under pressure, contrarian investing appears to be gaining ground as investors anticipate a swift recovery after a US-Iran peace deal is finalised.
The recent correction in the Indian stock market has narrowed India’s valuation premium, positioning large and mid-cap companies at more comfortable levels.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that the Nifty mid-cap index is now trading at 29 times earnings, while the Nifty small-cap index is at 33 times earnings. The higher earnings potential has pushed valuations higher.
Therefore, Vijayakumar suggests investors should consider investing in larger companies at this juncture.
Pankaj Mathpal, the founder of Optima Money, believes that buying at the current levels is an opportunity and investing in mutual funds with a portfolio in large and mid-cap companies is a good strategy. This perhaps is the perfect time to enter the market, especially for mutual fund investors who missed the bus earlier, before the bulls took over.
Experts believe that India’s macroeconomic outlook remains healthy, with sectors such as manufacturing, consumption, power, financial services, infrastructure, healthcare, education and digital services likely to stay strong. This is likely to benefit large-cap companies and mid-cap stocks, which will be the biggest beneficiaries of the expanding economic activity.
Most experts recommend large and midcap mutual funds since large caps provide strength, midcaps have a huge growth potential, and investing in times like these can give alpha returns.
Large and mid-cap mutual funds have been performing well over the last few years. For example, the , which is one of the oldest funds in the category, has given a return of close to 17% over the last three years. Similar funds from ICICI, Bandhan and Invesco have also given double-digit returns over a three-year period.
are equity mutual funds that are required to invest at least 35% of their assets in large-cap stocks and at least 35% in mid-cap stocks.
Large-cap companies are the top 100 by market capitalisation, while mid-cap companies are ranked 101st-250th. These funds combine the growth potential of mid-cap companies with the stability of large-cap companies.
Disclaimer: This story is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.