The Hindu Business Line : `Mid-caps still have many takers'

MR SUHAS NAIK, Director - Equity Market, ING Vysya Mutual Fund, virtually dismisses the theory that investors would begin to keep away from mid-cap counters, despite the losses that a section of them have suffered in recent days.

"Indian stocks are currently neither very cheap nor are they very expensive," he told Business Line.

Excerpts:

Are some investors shying away from mid-cap stocks?

That's not really true. The market has tasted success with mid-cap allocations and will not cast off a winning proposition in a hurry. There is a lot of evidence to suggest that mid-caps still have many takers.

This is because investors are aware of the situation on the ground and this has struck a serious note with them. They do realise that many small- and mid-sized companies have spruced up operations in the recent past. That has happened, as everybody knows, largely by way of structural reorganisation and expansion.

Some corporates are going through various recast programmes even as we speak. They may justifiably expect to grow in stature because of positive steps taken by their managements. Generally speaking, balance-sheets have become cleaner, debt-servicing costs have come down and operations have expanded.

Take, for instance, names such as Bharat Forge or Crompton Greaves, which have gained prominence over the years and have become textbook cases already.

Is the average investor more comfortable with a relatively smaller mid-cap fund?

Oh, there may well be an ideal size. Some quarters seem to suggest that investors would be at home with say, Rs 300-350 crore. The point is, you may also like to consider funds with a decent but limited mid-cap exposure.

An investor may consider entering into a scheme that perhaps has a 40 per cent allocation to these stocks. That will tantamount to controlling possible downside risk. If mid-caps actually lose ground, the fund concerned would not suffer too much. Other investments in the form of large-cap counters or even index heavyweights can emerge as the saviour.

At the end, it will all depend on the kind of risk an investor is willing to take. He or she may not mind a comparatively high-risk proposition as part the overall asset allocation exercise, especially when the probability of earning good returns is high.

How much do you think the broad market will deliver this year?

That's not an easy question to answer. Taking a moderate stand is often a good thing, and based on this premise, expecting a 15-17 per cent growth may not be asking for too much.

Naturally, I do not wish to take a direct call on index movements but I think investors should have no major reason to feel really alarmed. Yes, there are a few concerns to grapple with. But there are positive issues in the horizon as well.

One gets the feeling that indices are becoming more and more irrelevant...

Well, some sections of the market do try to convey such an opinion. As fund managers, we need to constantly keep an eye on trends, not on indices in isolation.

At the moment so many sectors are crying out for attention. And there are numerous intricacies too.

Take, for example, textiles. There are various categories of players within this one area. Here, company-specific views will assume great importance.

Also there are a host of important factors, including global issues like oil prices, to consider.

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`Mid-caps still have many takers'