“Large caps look inexpensive compared to small and midcaps.” A value investing peer said this in a rather complaining tone. To investors who made most of their wealth buying small and midcaps, these are troubling times indeed. The situation has remained so for the past year. Investors have been struggling to cope with this. Stocks were expensive and people were buying them as if there was no tomorrow.

Nothing contrasts this frustration more starkly than the bold and aggressive SIP flows into the same space from retail investors. Investors have been pouring money into this space based on past returns. While experienced investors struggle to deploy money in the space, public investors were partying with the monies of the retail investor. But, the first signs of cracks are clearly there. For starters, stocks which were not owned by mutual funds have corrected sharply. This gives a ture impression that fund owned stocks are safe. But, there is more to this than meets the eye. Fund owned stocks in the midcap space will correct when the funds are not in a position to support their prices. It is fairly safe to assume that day shall come.

Meanwhile, the market struggles to find defensive investments in equity. Portfolios will take an increasingly defensive stance and returns over the next 12-18 months will probably see better traction in defensives. Aggressive investment strategies will probably take a break. The time is ripe to stoutly defend portfolios.


Recent Posts

Fixed Income Outlook – May 2024

Posted on May 4, 2024

Business As Usual

Posted on May 4, 2024