Few mid- and small-cap stock valuations are at a reasonable level and look to be attractive in some cases, said Mahesh Patil, Co-Chief Investment Officer (Equities), Aditya Birla Sun Life Mutual Fund, in an interview.
Although Sensex has hit an all-time high record, the mid- and small-cap stock valuations have descended sharply. However, the overall growth and earnings in the market are improving, said Patil of Aditya Birla Sun Life MF, during the interview with The Economic Times.
“Some mid- and small-cap stock valuations are at a level, where they are reasonable and looking attractive in a few cases,” added Patil.
Investors can expect returns of 12 percent to 13 percent from equities during the following three years. Returns from the mid-caps category may possibly be higher, although risk and volatility will also remain higher, said the Co-Chief Investment Officer of Aditya Birla Sun Life Mutual Fund.
He also added that the investors can “build their mid-cap portfolio” during the next six months.
The Indian pharma sector’s golden period has gone, and RoCE (Return on Capital Employed) of the sector has reduced to 10 percent from 30 percent, and it is expected to reach 15 percent, said Patil. Hence, there is no chance to be optimistic on the sector in the near term, added the Co-Chief Investment Officer.
The stress in PSU banks would continue, and would come down as growth picks up, Patil replied to a question related to it.
The pressure on balance sheets of corporate banks and PSU banks would continue approximately for the subsequent one year due to “higher provisioning,” he added. Therefore capacity to lend would be a challenging task. Hence, there would be improvement in capital markets and bond markets. Private banks and NBFCs would pick up growth and take a larger market share.
On the capex side, investment pick up is expected as capacity utilisation has started increasing. According to Patil of Aditya Birla Sun Life Mutual Fund, business confidence will boost and we could expect corporate capex within a year, if growth picks up and withstands.[The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views and/or the official policy of the website. ]