🔷️Investors in Midcap and smallcap stocks had a torrid time from past 18 months.
🔷️And it’s primarily because of the high valuations that these stocks reached in 2017, and the subsequent fall we have seen from start of Jan 2018 and is still continuing.
🔷️When Nifty was TRADING at 12000+ we had suggested to Book profits & One should also book profits in INDIVIDUAL stocks.But now it seems One should look for long term investment strategy in next 6 months.
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🔷️2020 or 2021 can be a year of strong bounce back in midcap & Smallcap index.That dosent mean wroste is over for them in short term to Medium Term.
🔷️The fall can continue from current levels Also.But Downside seems to be limited to 4350 to 4650 in SMALLCAP index & 13000 to 14400 zone in Midcap index in wroste case scenerio as per current Data & scenarios.
Currently MIDCAP index is Trading at 15300 levels & smallcap index at 5280 levels.
Both Smallcap & Midcap Index are Trading at New 52Wk Lows
🔷️Some stocks within these segments have seen much higher correction than the benchmark indices.Even though there is no fundamental changes in there bussiness.only sentiments are the dampener.
🔷️However, to use the clichéd phrase, there seems to be ‘cautious optimism’ from some Big fund House.And it is largely because of the outperformance of the large-cap stocks.
Historically, two consecutive years of negative mid-cap returns are a low probability event,But this can happen this year. which bodes well for the performance of mid-caps & Smallcap next year in 2020.
🔷️Since 2018 Midcap & Smallcap index has give Negative returns of 30% & 45% till now.There can be some more pain left before a sustained rebound is witnessed in Midcap & Smallcap stocks.
🔷️We firmly believe current situation is the opportunity To Invest in Broader market and also in few large caps.Broader market looks for attractive vs Largecap.But Largecaps are first to bounce & than broader markets catchup.
🔷️There is Extreme pessimism over past few days in Equity markets.appears overdone as things are never bad as they look and businesses and economy usually turnaround and keep growing. Next 3-6 months will be very crucial and should see some recovery in overall market in terms of Growth,Liquidity & that can reflect in stock prices. One should expect very good opportunity in markets for making long term investment bets in next 6 months.
🔷️Negative sentiments in Midcap & smallcap space have brought prices of many Good and Quality bussiness to a realistic & historically low valuation.
🔷️The fall in some good & Quality Midcap & Smallcap has to the tune of 50% to 70%.This has not happened for the first time.In past also good bussiness where fundamentals are strong has bounced back Strongly.
🔷️Investment made in Right set of companies during steep correction or in bad phase like current phase would give Good Rewards in Longterm.Those who have learned to be patience & those who would bear the storm would benefit largely.
🔷️Investing in strong fundamental companies with Good bussiness in Turbulence time would always create Wealth in longterm.
🔷️Currently sentiments are not in favour of investors.This negativity also effecting global Investor base.Domestic sentiments would turn positive only when Doing bussiness in india would turn easier.
🔷️There is so much pessimism in market currently that no one wants to invest in current environment.Many feel cash is the king.But one should slowly start investing in Quality bussiness in SIP with 3 to 5 years views.
One thing is happening positive in markets inspite of Slowdown in Economy & Issues in Many sectors & bussiness.The Recent GST collection for july month was above 1 Lac Crore.This itself can say that we are close to the bottom & can see revival from start of festive season from Nov or Dec or may be in next 6 to 9 months.
The current pain in Markets Espically in Broader markets can End soon.Technically also the pain from last 18 months can get over in next 3 to 6 months.
“THE NEXT LEG OF BULL RUN WOULD BE MUCH STRONGER IN TERMS OF PRICE ACTION”
Shares should be bought in phased manner in SIP only. One should not give weightage of more than 10% in single share. IN SIP basis when you buy dont see share on daily basis buy more when share correct 5%-10% but if share correct more than 20% and negative indicator also check share performance their financial health. In case not good. Exit immediately.
Build a portfolio of mix sector of Largecap/Midcap & Smallcap.
Identifying exact bottoms is extremely tough & investors should not pick up companies just because it has fallen a lot.Also look at sectors future Growth,Govt.policies for that sector. Never make the mistake of averaging a loss and last but not the least always keep stop loss as per Risk.
Remember – “what is looking safe is Not Looking cheap and what’s looking cheap is Not Safe“
Disc- All views expressed are personal and for Educational and study purpose only. Consult your financial advisor before investing or taking any position based on above article.