Mittal finds largecap stocks attractive as “valuations are broadly in line with historical averages and expectations for future growth are achievable.”
Don’t buy smallcaps or companies which are highly regulated or at risk of government intervention, warns Peeyush Mittal, Portfolio Manager at Matthews Asia and co-manages the firm's India strategy.
Speaking to Bloomberg, Mittal said he finds largecap stocks attractive as “valuations are broadly in line with historical averages and expectations for future growth are achievable.”
The San Francisco-based $1.5 billion Matthews India Fund has reduced its mid- and smallcap holdings to about 62.6 percent of its total portfolio as of December-end last year from 73.5 percent at the end of 2016, the wire agency reported. The fund has returned an average of 15 percent annually over the past five years versus about 12 percent for the BSE 100.
In its yearly outlook to investors, the fund house said government tax receipts seem to be lagging forecasts, which could hamper budgetary spending after the general elections and be a drag on growth.
“A government formed with the support of too many small political parties lends itself to instability and dampens the confidence of businesses at large to make the future investments necessary for growth and innovation. Government stability is key,” the report quoted Mittal as saying.
Commenting on the ongoing correction in the small- and midcap space, the fund manager was quoted as saying: “If small- and midcap stocks continue to underperform, there is a risk that equity inflows turn to outflows, which might lead to a sharp correction in stock prices.”
