» Business » Deluge nearly over; invest in largecaps over midcaps

Deluge nearly over; invest in largecaps over midcaps

By Piyu Sen,
May 24, 2006 12:38 IST

Markets as we all know pushed the panic button. But looking at the positive side, experts say it is a good opportunity to take a call in the market as it has become fairly attractive and has thrown out all negatives in terms of valuations and leveraging. In simple words, the deluge is over.

In fact, the crash is a blessing in disguise for those investors who could not afford large cap stocks earlier. Experts now prefer frontliners over their midcap counterparts, the reason being their affordability and quality. They give names like ITC, Reliance Industries, Gujarat Ambuja, Hindalco and many more, which look extremely attractive now.

Markets, which have fallen by 18 per cent on the index, will be influenced by factors pertaining to the global scenario, volatility in metal prices and interest rate, going forward.

Antique Stock Broking in its report suggests that the market has tested the long-term trend line support in the region of 9500-9820 and that it clearly seems that market are in a long- term uptrend.

S P Tulsian, Investment Advisor, said, "One can always argue that India was a bit expensive and if we accept that argument then definitely it has become very attractive because it has fallen by 20-25 per cent on stock level and 18 per cent on the index."

Investors should look at the positive side to this mayhem and take this as the entry point for investors. He prefers large caps to midcaps, "They can look at frontline stocks, which are index based and fundamentally strong. One can also take a call on midcaps that are large in terms of turnover and reputed management. But, I prefer largecaps over midcaps,"

Some of his stock picks are ITC, Reliance Industries, Gujarat Ambuja, Hindalco, and Jaiprakash Associates.

Tulsian further said that the markets look healthy and will do well in the next 1-1.5 months, "Whatever excesses were there in terms of valuations and leveraging has all got sorted out, so I don't see anything negative happening. Markets have become healthy. Markets will do well in the next 1-1.5 months."

Sejal Doshi, Finquest Sec Pvt ltd, said that markets might correct further because of some selling pressure and profit booking. "Already we have seen some decent amount of correction from the top. Markets further might correct because of some selling pressure and profit booking."

He says that a correction gives a breather to the unprecedented move of the market, "Correction is a part and parcel of the market. It is always good because it gives an opportunity and it takes a breather to the unprecedented move that we saw. This is a level where investors are getting an opportunity to buy quality stocks. They should keep a long-term view rather than short-term view. They should stay invested in well-researched and fundamentally strong companies."

Frontliners like Reliance, ITC, SBI, NTPC, Hindalco, Neyveli Lignite, and Gujarat Ambuja have come to attractive levels and relatively the business model is stable. These companies have clarity and visibility in terms of earnings growth, says Doshi.

Talking about midcaps also being attractive, he said, "Midcaps are also attractive but at this point in time the frontliners are available at comfortable valuations and any pull back in the market will be led up by largecaps and not midcaps. But definitely there are some good midcaps, which can be looked at from a longer-term view."

Amit Chandra, MD of DSP ML, further encouraging the investor to play in the market says that there is no reason to panic. Chandra said, "We think there is no reason to panic at all. In a way, it is great that this correction is deep and sharp. It will keep interest alive in the market as opposed to sort of a slow drip selling, which could have happened over an extended period of time."

While, Nimesh Kampani of JM Morgan Stanley, giving a word of caution says, "Investors should be very watchful. They should be careful even while getting in at lower levels because there may still be a possibility of market falling a little bit more. At the same time, those who are long-term investors get an opportunity to buy."

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Piyu Sen,