S Krishna Kumar, CIO-Equity, Sundaram Mutual Fund said in the last 4-5 months there has been softness in the small and midcap space and valuation have become reasonable compared to last November-December.

While valuations have corrected with prices on the other side the economic fundamentals too are improving, he said, adding that “Most of the stocks are at reasonable valuations providing good entry opportunity with medium-term perspective.”

Moreover, there has recovery in corporate earnings seen in several midcap and smallcaps for some time now. “Clearly there has been sharp rebound in terms of earnings growth in most domestic cyclicals and some sectors linked to global recovery like IT etc.,” he said.

The house is betting on domestic economic growth stories like hospitality, domestic staffing services, cement, infra, light engineering capital goods etc. These spaces have been added to the portfolio in terms of stocks and weights, said Kumar.

He said yesterday’s dovish stance by RBI makes case for good recovery in the financial space, especially wholesale funded entities. Bond yields which were all over the place in the last eight months are back to reasonable levels now, he said.

He also confirmed that they no longer hold Bajaj Finance and Bajaj Finserv because they have moved to the largecap category.

With regards to auto ancillary space he said it is a structural long-term story. Within the auto space different cyclicals would play out like tractors, LCVs, MHCVs, two-wheeler, cars etc., and auto ancillary space caters to whole host of segments, so they have a derisk business.

First Published:Apr 6, 2018 10:34 AM IST