In a worsening macroeconomic situation and volatile markets, there has been a flight to safety, with investors parking their funds in stocks perceived to be safe havens with a reasonable amount of growth visibility. With a lower risk appetite, investors have parked a larger share of their funds in large caps. Not surprisingly, the broader markets have outperformed, with the Sensex gaining 11.3 per cent over the last one year, while the BSE Midcap index has lost 9.5 per cent in the same period. Consequently, pockets of value have emerged within the mid cap space defined here as stocks with a market cap less than Rs 25,000 crore. And, experts say, given the environment, if investors follow a bottom-up approach, it should work well and deliver better results.
G Chokkalingam, chief investment officer & executive director, Centrum Broking & Wealth Management, sees the bottom-up approach to invest in stocks that have seen valuations become cheap as a good strategy. While advising to avoid the infrastructure sector, he says investors should consider companies with a sound business model, export-oriented or companies with no debt, sustainable profit growth and good corporate governance
Among the picks, while Apollo Healthcare is the largest player in the private healthcare space, Zee Entertainment is the largest in the entertainment sector. The same is the case with Tata Global, Bata and Pidilite. Others such as Amara Raja is a strong number-two player in the organised battery segment, which is almost a duopoly.
Given that a few of these picks have seen corrections in the recent past and others are reasonably valued, investors with a holding period of a year can expect good returns.