Latest news with #SMID
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Business Standard
4 days ago
- Business
- Business Standard
Emkay Global bets on SMIDs, reduces largecap holding on valuation concerns
Brokerage firm Emkay Global Financial has rejigged its model portfolio while taking a 'cautious' near-term stance on Indian equities. According to the firm, stretched valuations and weak Q1 earnings underway warrant a more prudent approach. The early-bird results for the April–June 2025 quarter (Q1FY26), which consists of samples of 176 companies, showed that Q1FY26 net sales (gross interest income for banks) of early-bird companies grew at their slowest pace in at least 16 quarters. Revenue slowdown, coupled with faster growth in operating expenses like employee costs and overheads, hit the bottom line. The combined profit before tax (PBT), excluding other income, contracted 10.3 per cent year-on-year (Y-o-Y) in Q1FY26, their worst showing since the Covid pandemic. Inclusion of SMIDs Emkay Global Financial has revamped its portfolio by including certain small-and midcap stocks (SMIDs), while reducing holdings in largecaps. The new Emkay Model Portfolio (EMP) will now follow a fixed 40/60 split, allocating 40 per cent to five selected SMID stocks and 60 per cent to large-cap stocks. The SMIDs added include: Bikaji Foods – for its strong execution in one of the brighter areas within the consumer staples sector. Motilal Oswal – has a high-conviction play on capital markets. Shriram Pistons – a rare low P/E stock with rising earnings momentum and improving return ratios. Metropolis Healthcare – seen as a high-growth play with exceptional return ratios. Voltas – stock corrected due to a weak summer, despite being in the midst of a strong growth cycle. Thematic stocks A subsection for thematic stocks has been created by the brokerage in its new model portfolio. Emkay will not trade stocks under this category for short-term trends – the only triggers for exit would be a structural change in fundamentals or better alternatives within the theme. Key changes in this segment include: InterGlobe Aviation (IndiGo) – weight increased to 6 per cent, seen as a long-term beneficiary of India's rising affluence and growing air travel demand. Eternal (Zomato) – weight raised to 8 per cent, as Emkay believes it is best placed to capitalise on the quick commerce boom. Dixon Technologies – allocation increased to 6 per cent, on the back of its exposure to the rapidly localising Indian electronics sector. Sector basket additions Discretionary is brokerage's top sectoral choice with an 'Overweight' stance as it sees a revival in consumption from H2FY26, led by monetary easing, a lower base, and tax cuts. This includes Internet and EMS in addition to Autos and auto ancillaries. The sector accounts for 15 per cent of the portfolio. Healthcare now holds 7.4 per cent of the whole portfolio with the addition of Metropolis. However, this is split across pharma, hospitals, and diagnostics. The brokerage is 'Overweight' on this sector, too. On the contrary, the brokerage has downgraded Technology to 'Underweight', citing stretched valuations and limited upside after the recent rally. Its 'Underweight' stance on staples has been reduced due to the inclusion of Bikaji, though it continues to hold zero exposure to large-cap staples. Meanwhile, Industrials has been moved to 'Overweight', with IndiGo and Voltas representing the sector. Additionally, Emkay has exited Tech Mahindra, Larsen & Toubro (L&T), Power Finance Corporation, Cholamandalam Investment, Tata Motors, and Page Industries.
Time of India
01-07-2025
- Business
- Time of India
Why Atul Bhole is keeping IT stocks on his watchlist
Atul Bhole , Executive Vice President and Fund Manager at Kotak Mutual Fund , identifies IT stocks as a potential under-the-radar opportunity amid current market uncertainties. While the sector has underperformed year-to-date due to concerns over US economic conditions and AI disruption , Bhole sees compelling reasons to pay attention to this overlooked space. Edited excerpts from a chat on market outlook, smallcap investing and sectoral trends. The markets have rallied sharply from April lows. How sustainable do you think this uptrend is, especially in the context of rising valuations and global uncertainties? Amidst global uncertainties, the Indian economy is showing incredible resilience. The macro stability in terms of twin deficits & inflation, rates, currency has been tested multiple times in the past few years and India is coming out shining on each of those occasions. In addition to this macro stability, we are able to maintain relatively better growth rates. The government and RBI are collectively putting efforts to improve the demand conditions. No doubt, favourable flows dynamics, which essentially an outcome of improved macro, is supporting the markets. While valuations are on the higher side, improved stability and growth opportunities may keep supporting the markets. Obviously, some volatility cannot be ruled out in light of uncertainties & investors should learn to take advantage of the volatility. Many investors are again raising eyebrows on valuations in the small and midcap space. What do you think? Small & midcap (SMID) valuations are undoubtedly at premium to largecap as well as to their historical valuations. Versus largecap, while SMID valuations are expensive at aggregate level, like-to-like business valuations are similar. For e.g. largecap apparel retailer & SMID apparel retailer are similarly valued. Higher proportion of banks, utilities & commodity stocks make large-caps appear less expensive. These stocks generally trade at lower P/Es due to business characteristics. When compared to historical valuations, a couple of points to ponder over re-rating of the SMID universe. First, stable macro & growth opens up more opportunities & allows SMID companies to chase those growth opportunities with sharper focus. Secondly, over the years, SMID companies' resilience in terms of margins & balance sheet has improved with size & scale – they can absorb shocks much better than earlier. Third, corporate governance standards & capital allocation decisions also experienced good improvement with regulatory & investor involvement as well as managements' own learnings. Fourth, few of the high growth themes like hospitals, EMS, durables etc are present only in the SMID universe. We believe these factors enable SMID to trade at higher valuations vs historical range. Live Events Keeping in mind the above factors, we believe investors need to manage the risks of SMID investing through asset allocation & systematic investing through MFs . Risk management is an ideal way to approach the SMID valuation conundrum rather than avoiding the risk. What filters do you use to separate sustainable small-cap stories from those riding temporary momentum? Momentum stocks typically ride any compelling narrative valid at that point of time & largely lack business or balance sheet strength. Investors are typically dragged either by greed or FOMO in these cases. Such stocks have certain peculiar features like illusory prospects (almost story-like) about future growth, most often -lesser free float, promoters with nil or compromised track record etc. Strength of the business model & promoter/management quality has to be the starting points for evaluating any SMID opportunity. Longevity of growth, margin sustainability, robustness of balance sheet, return ratios, industry structure etc goes in the evaluation of business models. Management evaluations primarily involve looking at execution track record as well past actions relating to capital allocation etc. Studying the quality as well as diversity of the investor base proves to be an important & useful filter in separating rice from the chaff. Consumption, capex, and financials seem to be the market's favourite themes right now. Are there any sectors you believe are flying under the radar? One can keep an eye on the IT sector which has not performed particularly well YTD. Concerns over the US economy & AI-led disruption are keeping the IT stocks under check. While we can't predict broad economic trends perfectly, the scenario doesn't look like getting very precarious & US banks/corporates financial health is relatively better this time. Assuming normal business cycle returning, IT spending can come back. After every major technology adoption, Indian vendors have actually experienced more volume of work. Earning growth expectations of IT companies range are not very different vs broader market. Stocks, particularly large-caps are trading at relatively reasonably valuations & provide dividend yield support of 2-2.5%. These factors merit attention. Additionally we are also keeping watch over the chemical sector. While the sector was going through a down-cycle in the past 2-3 years, companies are continuously investing behind products, client engagements & facilities. The persistent price fall of 2 years seems to be over & prices are stabilising now. There are initial hopes for revival by companies. It may need some more patience, but provides a good opportunity to accumulate select chemical stocks. Nifty now has 3 stocks - Trent, Jio Financial and Eternal - trading above 100 TTM PE levels. Do you see this trend as a sign of the market accepting triple-digit PE stocks as part of the mainstream narrative? Nifty inclusion or exclusion is a function of the set mechanism of following free-float market cap methodology & is separate from valuations of a particular stock. From time to time, few companies emerge, which exhibit high growth potential with a large target opportunity set & their perceived ability to capture those opportunities. The market collectively tries to discount the future growth for each company & assigns a price. In few cases, such valuations can appear high compared to near term profitability as the companies try to invest disproportionately ahead of time & seed the market. Such incidents need to be evaluated on a case-by-case basis and cannot be generalised as mainstream. Pertinent to note that, even when the market is collectively accessing the growth potential, there are risks of following herd mentality which can be completely misplaced. Changes in regulatory, competitive or tech environments can support or derail such hypotheses. We've seen promoters, PEs, and VCs aggressively selling stakes recently. Do you see supply-side risk to the market? The increased supply can be seen as a stabilising force to absorb the flows coming into the capital markets. It is providing incremental avenues to the money managers to invest & keeping the price levels in check at aggregate level. The fresh money raised through QIPs/IPOs are also on the rise and actually providing growth capital to corporates. Promoters paring their stakes is an obvious signal that they are considering their shares trading at higher than fair valuations. However it needs to be seen as an additional input in an investment evaluation. There can be errors of judgement about future potential or promoters can also have different goals like diversification or other uses like charity, buying real estate etc at a particular life stage. We have many examples where stock prices go up even after promoter stake sales. Stock prices would respond to earnings growth over a long time. Money may be taken out of markets with such stake sales but at the overall economy or market level, it remains in circulation & helps overall growth. How should investors approach sector rotation, and do you see any early signs of leadership change in Indian equities? Business cycles & sector rotations are really getting shorter even since Covid. We are observing that stock prices in any particular sector factors in positive news flows or earnings uptick pretty quickly. Simultaneous information dissemination as well as herd mentality/ FOMO drives such moves. At the same time, sectors going through a down cycle or lack of triggers, at times, are ignored. Even for most astute of investors, it is very difficult to capture all such sector rotations. In chasing sector rotations, invariably investors end-up building positions towards the end of the rally & then get stuck at near-peak costs. Another important element to weigh is the tax treatment when one tries to sell from one sector & get into another. It can set back the compounding almost by a year or two. One way to approach sector rotation is contrarian thinking- buying what is going through a down-cycle & is ignored by the markets. It needs sound research backing to build conviction & considerable patience as well. Another way is building a basket of better companies across sectors with slight sector deviation & keep re-balancing their position sizing at the margin. The second approach is simpler as it takes away the timing element to a large extent. Diversified mutual funds or business cycle funds offer good solutions which can deal with this issue with research backing & tax efficiency.
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Business Standard
04-06-2025
- Business
- Business Standard
Emkay bets Rs 1,000 cr on small and mid-caps with New Growth Engine Fund
Emkay Investment Managers on Wednesday launched the Emkay SMID Cap Growth Engine Fund, a portfolio that underscores growing investor appetite for India's small and mid-cap space, aiming to capture the next phase of India's economic expansion. Targeting a corpus of Rs 500–Rs 1,000 crore, the fund is being offered in both AIF and PMS formats, and is designed for investors seeking high-conviction exposure to small and mid-cap companies expected to drive the country's future growth story. So, what's the pitch? Why SMIDs now? EIML's new fund is based on a simple idea: India's growth story is no longer just about the giants. Smaller and mid-sized companies — especially those driven by innovation, digital expansion, capex, and consumption — are becoming the real engines of future wealth creation. And here's the kicker: SMID stocks have already delivered strong returns over the past 5 years, but EIML believes that the next 3-5 years could be even better, thanks to: Easing inflation Falling interest rates (which helps smaller businesses that rely on borrowing) Improving household incomes Supportive liquidity conditions Strong backing from FIIs and domestic mutual funds What makes this fund different? Name: Emkay SMID Cap Growth Engine Fund Structure: Available both as AIF (Alternative Investment Fund) and PMS (Portfolio Management Services) Target Corpus: ₹500–₹1,000 crore Strategy: Invests in listed small and mid-cap stocks using bottom-up stock picking Research Framework: The unique E-Qual Framework that scores companies on business strength and management quality Benchmark: S&P BSE 500 TRI Recommended Horizon: 2–3 years Fund Managers: Market veterans Manish Sonthalia and Kashyap Javeri Investment Objective: The product seeks to achieve long-term capital appreciation by investing primarily in small cap & mid cap securities. Description of types of Securities: Under this PMS and AIF product investments are made in equities and equity related instruments. A balanced and well-diversified equity portfolio is created based on fundamental research. Investment Approach: The strategy follows a bottom-up stock picking process "Small & Mid Cap (SMID) offers broader exposure to India's growth story through innovation, digitalisation, capex, and consumption, providing more opportunities for alpha generation compared to large caps. These sectors are likely to benefit from macro tailwinds such as easing inflation, declining interest rates, rising household income boosting consumption, and liquidity measures supporting market revival translating into higher growth. Given that SMID companies tend to rely more on borrowing for their operations and growth, their higher sensitivity to interest rate cycles positions them to revive and potentially outperform in an environment of easing retail inflation and declining rates," said the company in a statement. According to EIML, mid and small-cap companies are anticipated for positive growth over next 3-5 years, making them a good potential bet for investing. EIML also highlights that mid and small-cap stocks have delivered a robust return over the past five years. It further notes that the current macroeconomic conditions and supportive valuations present an attractive entry point for SMID investments, particularly following the recent market correction. Who is this fund ideal for? If you're an investor who: Is looking for higher alpha than large-cap funds Can tolerate moderate to high volatility Has a 2–3 year investment horizon Wants to diversify beyond blue-chip stocks Believes in India's structural growth potential — then this fund might be a smart addition to your portfolio. "As of March 2025, small-cap and mid-cap mutual funds (MFs) together constitute over 30% of total equity flows, a significant jump from 5% a year ago. The dual support from foreign institutional investors (FIIs) and mutual funds makes this rally much more sustainable. Strengthening flows into SMID segments suggest that select opportunities in small and mid-cap stocks could outperform over the medium term," said Manish Sonthalia, Director &; Chief Investment Officer, Emkay Investment Managers Limited. I
Time of India
03-06-2025
- Business
- Time of India
Emkay Investment Managers launches SMID Cap Growth Engine Fund
Emkay Investment Managers Limited (EIML) has announced the launch of the Emkay SMID Cap Growth Engine Fund . EIML aims to raise Rs 500 crore to Rs 1,000 crore from this latest fund during FY26. The product seeks to achieve long-term capital appreciation by investing primarily in small-cap and mid-cap securities. Under this PMS and AIF offering, investments are made in equities and equity-related instruments , with a balanced and well-diversified portfolio constructed based on fundamental research. Also Read | How a Rs 50,000 Monthly SIP for 20 years can grow to Rs 5 crore, explains Vijay Kedia Best MF to invest Looking for the best mutual funds to invest? Here are our recommendations. View Details » by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Neuvěřitelné: Kalkulačka okamžitě ukáže hodnotu vašeho domu [podívejte se na to]! tržní hodnota mého domu Kliknout zde Undo The strategy follows a bottom-up stock-picking approach, supported by extensive fundamental analysis, including an in-depth study of the business, management, and valuation. The fund will be benchmarked against the S&P BSE 500 TRI, and investors are advised to have an investment horizon of two to three years. It will be managed by Manish Sonthalia and Kashyap Javeri. Live Events Small & Mid Cap (SMID) investing offers broader exposure to India's growth story through innovation, digitalisation, capex, and consumption, providing more opportunities for alpha generation compared to large caps. These sectors are expected to benefit from macro tailwinds such as easing inflation, declining interest rates, rising household income, and liquidity measures, all of which support market revival and higher growth. Given that SMID companies often rely more on borrowings for operations and expansion, they are typically more sensitive to interest rate cycles, positioning them to recover faster and potentially outperform in an environment of moderating inflation and falling rates. According to EIML, mid- and small-cap companies are poised for positive growth over the next 3–5 years, making them a compelling investment opportunity. The firm also highlights that mid- and small-cap stocks have delivered robust returns over the past five years. Furthermore, EIML notes that the current macroeconomic environment and supportive valuations offer an attractive entry point for SMID investments—especially after the recent market correction. Also Read | Gold prices may fall 12-15% in next 2 months, warns Quant Mutual Fund As of March 2025, small-cap and mid-cap mutual funds (MFs) together account for over 30% of total equity flows, a sharp increase from just 5% a year ago. The dual support from foreign institutional investors (FIIs) and mutual funds makes this rally far more sustainable. Strengthening flows into SMID segments indicate that select opportunities in small- and mid-cap stocks could outperform over the medium term. 'SMID offers a compelling mix of growth potential, valuation comfort, and supportive macro trends, making it a strong candidate for investment. The fund follows a focused bottom-up stock-picking approach, backed by in-depth fundamental research and our proprietary E-Qual Framework—arguably the only framework of its kind in India—to objectively score management quality,' said Manish Sonthalia, Director & Chief Investment Officer, Emkay Investment Managers.
News18
01-06-2025
- Business
- News18
Indian Equity Market Nears Lifetime Highs: Fundamentals Or FOMO? Market Expert Bhole Weighs In
Last Updated: Indian equity market nears lifetime highs due to strong macro indicators, foreign inflows, and political stability. Atul Bhole of Kotak Mahindra AMC discusses market fundamentals. The Indian equity market has rebounded after a prolonged sluggish period and is now approaching lifetime highs. Factors such as strong macroeconomic indicators, consistent foreign inflows, and political stability are providing positive momentum. As a result, market sentiment remains optimistic despite high valuations and subdued earnings growth. Markets are dancing near lifetime highs. How much of this is driven by fundamentals and how much by FOMO? Bhole: India's macro fundamentals are currently in a sweet spot and among the strongest globally. Tightly controlled fiscal and current account deficits, lower inflation, a stable currency, and steady GDP growth of around 6–6.5% are attracting foreign flows in a big way. While these fundamentals have been strong for some time, their resilience became even more evident during the ongoing global trade war. From the start of the year until mid-April 2025, FIIs sold close to $15 billion worth of Indian equities. However, since mid-April, the trend has reversed, with FIIs buying around $5.5 billion—largely from the secondary market rather than through IPOs, QIPs, or direct stake sales. Domestic flows have also remained reasonable, with mutual funds raising cash levels and retail participation staying measured compared to the recent past. While corporate earnings growth remains muted and valuations are stretched, strong macro fundamentals are clearly driving robust foreign and domestic flows into Indian equity markets. Bhole: Several SMID stocks witnessed value erosion of 40–60% between June–July 2024 and March–April 2025. These stocks were driven more by momentum, false narratives, illiquidity, and FOMO than by sound fundamentals or reasonable valuations. Institutional investors, such as mutual funds, which rely on research and expert insights, were able to avoid such pitfalls and limit drawdowns. Some retail investors likely learnt valuable lessons during this episode and may now start appreciating the value that mutual funds and advisors add to long-term wealth creation. However, the market often behaves like a voting machine in the short term—it keeps attracting new investors or leads the same investors to repeat new mistakes. The recent sharp rally in defence stocks after the skirmish is another example of greed or FOMO overriding rational investing behaviour. Operation Sindoor has also worked like an international defence expo showcasing the might of Indian defence companies. This is also reflected in the dramatic movement in share prices. How strong is the defence story on Dalal Street? Bhole: India's defence equipment industry has gained strong momentum over the past 3–5 years, supported by a government-led indigenisation push and larger, expedited orders. The ecosystem is developing well, with private sector players emerging as credible component manufacturers. Defence stocks performed extremely well post-Covid until mid-2024, driven largely by policy support and effective execution. However, much of the returns were driven by valuation re-rating rather than actual earnings growth. Price-to-earnings multiples jumped from 10–20x to 50–60x. Between mid-2024 and March 2025, many of these stocks saw 40–60% drawdowns from their over-stretched levels. Post Operation Sindoor, defence stocks bounced back significantly and are once again trading at valuations that may not be justified by near-term fundamentals. While these companies could deliver sustained long-term growth, the market seems to have priced in too much, too soon. A period of cooling-off or extended consolidation in stock prices is likely. With valuations stretched in certain pockets of the market, do you think the Q4 earnings season was strong enough to justify the rally? Bhole: The Q4 earnings season has been muted yet again, with 5–10% earnings growth depending on the sector and company size (large caps vs. SMIDs). However, the market hasn't reacted negatively, as expectations were already lowered after three consecutive quarters of weak growth and cautious corporate commentary. Markets are forward-looking. While Q4 results aren't particularly strong, future earnings could improve due to tax breaks, a normal monsoon, stronger wage growth, continued capex, and a low base effect. The ongoing rally is being driven more by strong macro fundamentals and capital flows. A pause may occur until corporate earnings begin to align with expectations. As an investor today, would you back consumption, capex, or financials in FY26? Bhole: Post-Covid, all major themes and sectors have had their moments in the sun and are now trading at fair to high valuations. The triggers that powered past sectoral rallies have largely played out. As the market normalises, future returns will likely be driven by individual stock selection rather than broad sector bets. At a sub-sector level, we are constructive on areas like quick commerce, hospitals, power transmission & distribution, EMS, and large private banks and NBFCs. On a contrarian note, the IT sector—supported by stronger-than-expected US corporate health and good dividend yields—could also present interesting opportunities. Given current earnings momentum, macro tailwinds, and political stability bets, is Nifty 30,000 a realistic target by end of FY26? Bhole: At the macro level, India is in a strong position. However, this must begin to reflect in corporate profitability as well. After the recent rally, Indian markets are once again trading at 21–22x forward PE, which requires significantly higher earnings growth than the current pace. Earnings may pick up with rising disposable incomes, continued capex, and structural reforms. However, global trade dynamics and economic trends pose external risks. Major economies like China and Europe could begin attracting more capital depending on tariff negotiations and monetary/fiscal policy shifts, given their relative valuation advantage. The US fiscal situation and dollar strength will also influence capital flows and asset prices globally. Investors have been caught between two battlefronts lately—the global trade tariff war and near war-like tensions between India and Pakistan. Now that both seem to be easing, what are the key takeaways for investors from this double dose of geopolitical anxiety? Bhole: In the long run, stock prices are ultimately anchored to earnings growth. In the short run, markets often overreact to news and sentiment. Over the past five years, we've witnessed events that typically unfold over a decade—or even a century. From the Covid pandemic and wars to supply chain shocks, dramatic progress in computing and AI, and aggressive fiscal moves by the US—markets have endured and evolved through all of it. The key takeaway for investors is to adapt to new realities while staying grounded in timeless investing principles. Studying market history helps investors manage their behaviour better. Patience, systematic investing, and the ability to exploit fear and greed cycles are essential to achieving long-term investing goals. top videos View all Disclaimer: The views and investment tips by experts in this report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions. About the Author Varun Yadav Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian More Stay updated with all the latest news on the Stock Market, including market trends, Sensex and Nifty updates, top gainers and losers, and expert analysis. Get real-time insights, financial reports, and investment strategies—only on News18. tags : India Stock Market Nifty stock market Location : New Delhi, India, India First Published: June 01, 2025, 15:00 IST News business » markets Indian Equity Market Nears Lifetime Highs: Fundamentals Or FOMO? Market Expert Bhole Weighs In
