Vinay Paharia, CIO of PGIM India Mutual Fund, has advised caution for weak mid-cap and small-cap stocks, which he categorizes as having low growth and low quality. He suggests that these stocks are in a bubble zone and may not be favorable for investors. However, Paharia notes that strong mid-cap and small-cap stocks, characterized by high growth and high quality, present an opportunity for long-term investors.
The research report emphasizes a relative preference for large-cap stocks over mid-caps and small-caps on a top-down basis. While Paharia remains optimistic about the medium to long-term prospects of Indian equity markets driven by strong economic growth, he urges caution due to the recent sharp run-up in markets.
Globally, the note highlights a slowdown in growth in developed markets due to elevated interest rates and persistent inflation. This situation is expected to have an adverse impact on export-oriented businesses in India. The report also points out weak rural consumption in India, with government measures to boost it being a key monitorable in the near term.
Despite these challenges, the dovish statement from the US Federal Reserve on incremental rate hikes has boosted global investor sentiment. Additionally, the recent BJP win in three state elections in India has positively influenced domestic investor sentiment, indicating increased probability for political continuity in 2024.
(With Agency Inputs)
Read also| Market Projections: Nifty Poised to Reach 21,000, Sensex Aiming for 70,000
