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Investors should tred cautiously in small-, mid-cap stocks: Kotak Mahindra AMC’s Nilesh Shah

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Kotak Mahindra Asset Management Company believes that the retail investors should avoid small- and mid-cap stocks and focus on large-cap stocks even though it is trading at a slight premium valuation.

Nilesh Shah, Managing Director, Kotak Mahindra Asset Management Company, told businessline that investors should tred with caution in the small- and mid-cap stocks as there been lot of frothy valuation build-up.

While large-cap stocks are trading near their historical valuations, it will get justified as the economy grows and earnings upgrade becomes a reality, he added.

In a fast-growing economy, there are opportunities even in the small- and mid-cap but they have to be identified.

“We have a small-cap fund and accepting investment without any restriction. Investment in small-cap needs an expert to find the right stocks at right valuation,” he said.

Kotak MF is avoiding momentum stocks which tends to go up every single day without any fundamental reasons and not chasing initial public offering for listing gains.

In fact, Shah said the fund house has skipped many IPOs in the recent times given the market frenzy and unreasonable valuations.

Asset allocator

The fund house has recently launched Kotak Multi Asset Allocation Fund. The new fund offer comes on the back of recent change in debt fund taxation that led to the removal of long-term capital gain benefit earlier this year.

The newly-launched fund will invest 65-80 per cent in equity, 10-25 per cent in debt, 10-25 per cent in commodity and 0-15 per cent in overseas assets.

Since the asset allocator fund invest minimum of 65 per cent in equity it will be tax efficient. The fund invest in multiple asset classes and then switch between them, depending on the fund manager’s strategy to ride market volatility and opportunities there on.

While the actively-managed fund will invest directly in equity and debt markets, it would tap ETF for investment in gold and silver.

The fund is not only tax efficient, but also leaves the fund managers decide on where to invest in a dynamically changing market; it is well-suited for first-time investors with an investment horizon of three-five years, said Shah.





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