There is undoubtedly a severe price correction from microcap to midcap stocks and, barring few 10-15 stocks, even large-cap stocks have also witnessed a moderate price correction, said Nilesh Shah of Kotak Mahindra AMC in an interview to CNBCTV18.
“Nifty index is quoting at 8,500, so by definition, it becomes part of the bear market except for 15-20 stocks. The same polarization is there even in midcaps and smallcaps,” he added.
Talking about the interest rates, Shah said, “Around the same time last year, RBI had increased the interest rate by 25 bps and at that time we were hoping for 7.5 percent GDP growth for Q4 FY2019, but the actual growth rate came at 5.8 percent.”
“Therefore, one could say that the real interest rate burden on entrepreneurs have been quite high and which is where we are seeing a part of the slowdown, but to attribute everything to high real interest will be a fallacy, ” he further added.
He further said that policy predictability needs to come out of this slowdown.
“It’s not only the lower interest rates but also the ecosystem around entrepreneurship in terms of policy predictability which is necessary to come out of this subdued phase,” said Shah.
On the investment front, he said, “We will go out on our limb to say that this is the time to buy small and midcap.”
“See what corrective steps will be taken by the government and based on that one can start doing systematic transfer plans (STP) into small and midcap stocks over the next 6-18 months.”
According to him, what is looking safe is not looking cheap and what's looking cheap is not safe.