Anoop Bhaskar, Head of Equities, UTI Mutual Fund
Are you finding value in midcaps?
I think more than the mid-cap segment, the small-cap segment is more worrisome. It has been bubble like. Almost 43% of the stocks in the BSE Small Cap Index have given a return of more than 100% in the last 12 months. Almost 10% of those stocks have given a return of more than 400%. If I was to now ask the audience which are the two best-performing stocks from that index, I don't think anyone would even know of these companies. So I think that is the segment of the market where there has been a lot of speculation. Today the small cap index is trading at a premium to the NIFTY, which usually is a good signal for us to be a little cautious on that part of the market.
In terms of midcaps, I think the value part of it has got eroded because of the move that is there. There is always the expectation that when the economy is at a turning point and when you are going to see a cusp of higher growth in terms of GDP growth rate and lower inflation and lower interest rates, then this segment tends to grow at a much faster pace than large caps. That is the kind of hypothesis that everyone today has about that segment. But the actual signs of earnings growth are still very moderate.
In the past when we have had these kinds of scenario, it's followed by very high growth. So people have those expectations as such for the segment.
What looks more attractive right now from a one-year perspective, equity or debt?
There are two types of forecasters, one who get it wrong, and those who lie. So, I don't want to get into either of the two categories.
We are too pre-fixated as a tribe of people to look at 1-year horizons. We should look at investing in equities as an equivalent of what we do in terms for provident fund, or PF. Most of us are employees of company where we get a PF and it stays with us for entire working life. People don't usually look at their PF balance every six months to see where they are and how much it is. Why do we have to look at our equity investment every year or every six months and either get euphoric or get down in the dumps?
Look at equity from a really long period of time, which is more than 15 years when you do an SIP. We've done a study of the BSE Sensex over a 25-year period; there is only a 44% probability to get a positive return on a one-year basis. You can toss a coin and get a higher probability. The timeframe for equity has to change for all of us.
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