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market | IST

Midcap and smallcap stocks offer plethora of opportunity, says Motilal Oswal

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Sonthalia of Motilal Oswal is positive on pharma space for quite some time because price erosion for generics in the US is coming to an end.

Mid-cap and small-cap stocks offer plenty of opportunities to investors at the current levels. That's the observation of Manish Sonthalia, head equities- PMS at Motilal Oswal Asset Management.
"There is plethora of opportunity in mid-caps and small-caps", he said adding that if investors are looking for comfort then they could invest in large-caps. "There is no doubt that the large-caps will do well but in the near-term growth for them is priced to perfection."
"The earnings for mid-caps have been decent, valuations have halved and so one can pick and choose stocks, " said Sonthalia.
Talking about the outlook for market in 2018, he said," Markets will not fall significantly although upside could be anybody’s guess. Moreover, oil and rupee have stabilized, GST collections seems to be picking up, monsoons are expected to be good so there are many reasons to believe that we will have positive returns from here," said Sonthalia.
Sonthalia is positive on pharma space for quite some time because price erosion for generics in the US is coming to an end. Also the clearance of Halol plant of Sun Pharma a big positive.
With regards to the mid-cap IT space, he said that a lot of growth has played out for the near-term in terms of P/E valuation re-rating and growth trajectory on topline and bottomline.
Talking about heavyweight Reliance Industries, Sonthalia said while the company has multiple businesses, its petro-chemical business is a cash cow.
"The problem is with the telecom vertical where pricing war is the real culprit and so ARPUs (average revenue per user) are falling due to competition," said Sonthalia.
Disclaimer: Motilal Oswal is the launch partner of CNBC-TV18.