Mirae Asset MF has launched its multicap NFO after building up sufficient research capabilities and expertise in the small caps space over the last 2 years, to do full justice to a multicap strategy that calls for a minimum 25% allocation to small caps.
75% of portfolio will be allocated to high growth companies which pass ROI filters for past 5-10 years. This may rule out deep cyclicals like capital goods, infra, realty etc. However, Ankit believes ancillaries to the realty and infra growth space may offer better prospects and meet the firm’s ROI filters.
25% of portfolio will be allocated to value stocks – some sectors which might throw up such opportunities now can include PSU banks, PSU utilities, IT, metals etc.
Small and midcaps will likely be 25-30% each and large caps around 40-45% of the portfolio. These ranges will remain constant, with fund manager latitude only within each range. Initial portfolio likely to be at top end of large cap range – 45%, on relative valuation attractiveness.
For all the talk of small caps in bubble zone, lets keep in mind that the small cap index is up 90% over last 5 years and earnings are up92%: they have just kept pace with earnings growth. Valuations currently are at a 20% premium to historical averages – but earnings growth expectations are higher too. Ankit is finding attractive small cap stocks across financial services, auto ancillaries, chemicals, logistics and other sectors.
Ankit does not see major risks to companies’ ability to deliver on earnings growth expectations and is therefore optimistic on his market outlook. He likes pharmaceuticals – especially companies with strong exposure to complex generics in the US, and consumer discretionary – especially durable goods manufacturers.