Small- And Mid-Cap Stocks Could Rally 15% In 2024, Says Emkay's Manish Sonthalia

Despite the surge in small and mid-cap stocks in 2023, they can rally around 15% this year along with the benchmark indices, according to Manish Sonthalia.

The markets can fall if there is anything very negative from where they are today, but "returns could be in and around 15%, and on the positive side, it will not be a negative year", Sonthalia, chief investment officer at Emkay Investment Managers Ltd., said on NDTV Profit's Portfolio Manager show.

With corporate earnings expected to be positive, no major geopolitical tensions, rate cuts expected globally and political stability, the year will not be a negative one, said Sonthalia, who handles assets under management worth Rs 800 crore.

"Large-cap stocks that have not done well last year could outperform this year," he said.

In the medium term, the mid and small-cap stocks will give better returns than large-cap ones, according to him. He suggested that 50% of the portfolio allocation should be in large caps and the remaining 40-50% in mid and small-cap stocks.

Sectors In Focus For 2024  

Sonthalia is bullish on public sector undertaking banks, on the back of valuations and growth parameters. "Private sector banks are more head-winded than public sector banks."

Power sector has more room for upside, on account of policy impetus. "Railways is a very good space and their overall potential is huge but near-term valuation is very prohibitive," he said.

The asset manager has the highest allocation in two consumer companies: Kalyan Jewellers Ltd. and Zomato Ltd. Sectorally, the highest allocation is in information technology and pharma space, he said.

Sonthalia is positive on consumer discretionary segment coming back and not so constructive on consumer staples, so long as rural continues to be weak. The rural economy is seeing a turnaround and investors can expect something positive, he said.

There is going to be some cooling off in the auto stocks, he said.

According to him, the IPO market is "too hot" to deploy clients' money. "Unless and until there is something that is reasonably valued, I would not look into it."