Hemang Jani, an Independent Market Expert, recommends investors to take some money off the table and shift focus from midcaps to largecaps. According to Jani, amid the ongoing midcap rally, there will be periods of sharp corrections, making it prudent to book profits and take advantage of the sectoral rotation. He highlights banks catching up within largecaps, particularly Airtel, which he believes should be a part of investors’ core portfolio due to its positive performance and expected average revenue per user (ARPU) growth.
Jani also discusses the correction in the smallcap segment, stating that while many investors may not have realized it, the smallcap index has fallen over 3%. He attributes this to stretched valuations and the market not factoring in regulatory actions and corporate governance issues faced by several companies. In light of this, Jani advises investors to re-evaluate their portfolio compositions and consider shifting from midcaps to largecaps.
The discussion then shifts to the manufacturing and defense manufacturing sectors. Jani notes that the order inflows in defense continue to be strong, and some companies are expected to report robust growth. Although the sector has performed well in the past year, he recommends having a meaningful exposure of around 5% to 8% and holding one or two good names. Jani also comments on the two-wheeler market, with a focus on TVS and Hero Motor. He believes that Hero Motor looks more attractive in terms of valuations compared to Bajaj and TVS, and mentions that auto ancillary companies focused on two-wheelers may also benefit from the strong performance of the two-wheeler space.
Jani shares his views on stocks like Pidilite and Varun Beverages. While he remains positive on Varun Beverages, he notes that valuations are relatively high. Jani highlights the company’s growth potential and performance but points out that earnings growth for Pidilite is less than 15% while valuations are high, making him uncomfortable with entering the stock at this point.
Lastly, Jani discusses the underperformance in the broader markets and expects it to continue. He suggests that while certain pockets may hold out, the broader market faces challenges due to stretched valuations, new money flowing into largecaps, regulatory issues, and corporate governance concerns. Jani recommends having a slightly overweight position in largecaps compared to the broader market.
