Largecaps face investor apathy, mid and smallcaps fuel euphoria: Kotak Institutional Equities
In a report titled ‘Despair, euphoria and hope in the same market’, Kotak said the continued stalemate in the West Asia conflict and the steady decline in stock prices have resulted in “despair” among investors in large caps. At the same time, positive developments in certain small- and mid-cap-centric sectors have fuelled “euphoria” among retail investors.
Kotak said it hoped for a quick resolution to the West Asia conflict, which could turn the current despair around large caps into hope. Otherwise, the current euphoria around SMIDs could also give way to despair.
The brokerage said it was “quite puzzled” by the apathy towards large-cap stocks, pointing out that most large caps offer decent value after the sharp correction in their stock prices over the past few weeks or the prolonged “time” correction over the past few years.
Kotak attributed the apathy among FPIs to broader concerns around India, including risks to the country’s macroeconomic environment from high oil prices and the lower attractiveness of India compared with other markets.
Read more: Market crash wipes out Rs 26 lakh cr in 8 weeks! Why soaring bond yields may hurt Sensex, Nifty more than elevated oil pricesAmong domestic retail investors, Kotak said the preference for small and mid-cap stocks is due to their focus on quick returns, with past returns acting as an important reference point for investment decisions.
The brokerage said it was not surprised by the excitement around these stocks among retail investors, given positive developments in sectors dominated by these companies, including capital goods, contract development and manufacturing organisations (CDMO) and defence.
