Tuesday, May 10, 2011

Midcap/smallcap is where the return is......

Q: You are talking about stocks selections. Good old fashion investors would say, “If I am buying over the next three-six months, I would buy some really good blue chips names like ICICI Bank, SBI, L&T, TCS kind of stocks and over a period of time make a lot of money.” But increasingly when you talk to people they seemed to prefer midcaps. They think there is more juice in that and largecap is boring. Do you see enough value in the largecap universe if you are buying as an investor?

A: Timeframe is of importance here. If you are taking a two-three or four year call, history tells you that you actually make money on only mid- and smallcap. So they handsomely outperform largecap. I was on the plane ride, conversing with a very seasoned stock market player and we were reminiscing about the early 90s and the type of stocks that were in those days.

There were all these big stocks. They were all Sensex components and they are no longer there. They don't even exist as companies. We had done one exercise, which went back to 1985 and almost invariably when a stock get's into the Sensex, that’s the end of that stock's story. It doesn't actually outperform the market from there on.

It is midcap and smallcaps for sure. There will be a few largecap winners but the odds are mid- and smallcap portfolio will outperform handsomely. That's what they have done in the last 20-40 years.

My Comments:
If someone is reading me religiously then they should be knowing that I always write on Midcap/Smallcap and the reason is the biggest return always comes from Midcap/Smallcap which I have been pointing since long time and which the Ridham Desai from Morgan Stanely has spoken recently and which I have highlighted here.
I remember I had once also written long back  that as soon as stock goes in A gr and F&O the stock start underperforming and the same vision has been shown from Morgan Stanely.
Well, I also just today read that Morgan Stanley is bullish on India for LT.
The Midcap/smallcap has been battered in this downfall and it hasn't made a comeback even when market has gone up.
There are still experts and analyst who still feels that market will make new low or the downside in market is still left .I donot agree with them.They have always reasons for what they say.


  1. Ridham Desai is one mutual fund managers who rarely comes to speak and one of few mutual fund managers whom I like to follow.

  2. Nilesh shah and Sandip Sabharwal are two another mutual fund managers whom it is worth listening to.