A sensible discussion on The Morning Brief podcast between Anirban Chowdhury and Nishanth Vasudevan on the FPI sell off. They also discuss some strategies for you to navigate the current market.
If you look at the price to earnings ratio, which is a very widely followed valuation parameter, that has kind of come closer to the 10-year average or it has kind of fallen slightly below the 10-year average, which basically shows that valuation among large caps, those have kind of eased quite a bit and they are looking much better in terms of valuations. But now when we look at the smaller companies, the small and mid-cap companies, the valuations who are there, they are still much above the 10-year average. Even despite all the correction.
…
Despite that, many of the stocks are still trading above their averages. And yeah, there is still a fair bit of valuation concern in many of them. And that is the same point which ICICI Prudential, CIO S Naren raised.
He said that in a recent conference, where he said that the appetite for small and mid cap stocks, they have not subsided. People are still doing a lot of SIPs in that. And that is where he warned that you can’t do SIP, a systematic investment plan in an overvalued asset class.
In that, he actually was eluding to small and mid cap stocks. So over there, his suggestion was that, if at all you want to do a SIP, you should go for large cap oriented schemes or large cap oriented stocks.