Small- and mid-cap stocks may not see significant rebound anytime soon, according to Porinju Veliyath, founder and chief executive officer of Equity Intelligence. With earnings slowdown and economic weaknesses, market recovery might not be imminent, he said.
"In the last few months, they have started correcting and in the recent weeks, there was a very sharp correction and afterwards, you can see most of these modern mid caps have gone down by 30, 40, 50%, and some of them 60 and 70%," Veliyath told NDTV Profit.
Everything will depend on earnings growth going forward, he said. Despite being fully invested in the markets, with the smallest company in Equity Intelligence's portfolio having a market cap of Rs 5,000 crore, he remains cautious.
The rise in market share of small and mid caps was overstretched in a short period, and 40-50% of small and mid-cap stocks are overpriced, according to the CEO. However, there are fantastic investment opportunities following the sharp correction, Veliyath said.
Seasoned investors have been cautious over the past year due to high price-earning multiples in the small and mid-cap segments, he noted.
"But, there are fantastic ideas now." After sharp correction of 30-50%, some stocks are expected to see high growth and some have niche business. Equity Intelligence has a lot of segments and sectors in economy and the markets in its portfolio, Veliyath said.
Despite recent corrections, he feels that these segments are still priced higher than normalised price-earning multiples. The market's future performance will heavily rely on sustained earnings growth and the broader economic environment, according to him.
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