Even as the markets continued to their downward march on Monday, market experts say that they see it as the first major correction since the beginning of 2017. Many of the top voices are advising investors to go for large-caps, as the mid caps appear to be overheated. Interestingly, both fundamental and technical indicators point large caps to be a better bet than midcaps.
Gautam Shah, Chief Technical Analyst at JM Financial told ET Now, “We see correction in the trading favorites, but don’t see a hammering in the large cap space.” In the same conversation, he pointed out, “The midcaps can lose as much as 10 per cent to 12 per cent in a very short span of time. If the index were to lose 10 per cent, you would have stocks losing anywhere between 10 per cent and 30 per cent. If that happens, it is going to be extremely damaging.”
The S&P BSE Midcap has returned 29% since January, while the BSE Sensex has returned 20% in the same period. Comparing the action in the two spaces, Vetri Subramaniam of UTI AMC said last week, “Either the large-caps are starting to do significantly better or the midcaps are taking a pause and pulling back to where the large-caps are. But the two relevant things to keep in mind are that, yes the outperformance of midcaps over large-caps has been very significant going back almost last four years, pretty much may to August of 2013 when we were going through a little bit of a mini crisis.”
Even though historically midcaps have done well, they are now overheated, feels the expert. In the same interview to ET Now he said, “If I were an investor making allocations and just looking at where valuations are, I would have to believe that the better opportunity today lies in large caps as compared to midcaps.”