\u201cIt is a period of normalisation for short cap and mid-cap funds. However, rocksteady and highly focused business have been immune to this volatility\u201d emphasises Ashutosh Bishnoi, MD and CEO of Mahindra Mutual Fund. In an interesting conversation with Nishita Nathani of Financial Express Online, he speaks about the market movements, economy and tips to spot a rock-solid immune-from-market-volatility business. Below is an excerpt of the conversation. India has surpassed France to become the 6th largest economy. However, the dark clouds of tariff war, rupee devaluation and rising fiscal deficit are looming. Can we expect a major move in the capital market? Capital investment has increased and there is an increasing demand for money. However, there is an external pressure from the US. This pressure has led to the devaluation of the rupee. In order to neutralise the tariff barrier, the US has led to quantitative easing. Also, Crude oil prices have been largely range-bound. There also seems uncertainty on how the global trade war could potentially unfold, but the tariff war won\u2019t end anytime soon. These are temporary adjustments and our economy is doing well and it will continue to grow. How should investors tread given factors like upcoming elections, rising crude oil prices and interest rates? Oil becoming a pressure point is done. The Indian economy is growing at 8 per cent and more. The equity market capital tends to be the same number in a large scheme. ALSO READ: Salary restructuring and income segregation should be deployed, says Shantanu Awasthi of Karvy Private Wealth What are your views on the recent midcap stock rout? Should investors turn cautious about small caps and mid caps? Currently, the market is separating high-quality business from the non-high-quality business. A high-quality business performs well even when the capital market shuts down. Before February the mid-cap and small-cap reached overvaluation. It is a period of normalisation. However, rocksteady and highly focused businesses are immune to this short-term volatility. For example, in a business of readymade textiles, the valuation is still high. Investors should invest in a high-quality business if considering to invest in small and mid-cap funds. What is a high-quality business and how can we spot one? A high-quality business doesn\u2019t depend on the market capitalisation rather than its earning. There are two guiding factors - performance on the financial statements and performance on the market side. We look at the financial statements to base our judgments. ALSO READ: A long-term horizon for your investments is likely to generate better risk-adjusted returns, says Avnish Jain of Canara Robeco But, financial statements are not immune to window dressing? Are they? There are a set of standard tools we use. They use a mathematical formula to determine how much of the accrual accounting has been abused. We clean them out and base our judgments on cash flows. That is how one can find value. Speaking of value, which sectors according to you has value? Consumer staples, FMCG, automobiles and some IT companies.