Manish Sonthalia, head equities-PMS at Motilal Oswal AMC, on Friday, said that midcap IT companies are trading at high valuations.
In an interview with CNBC-TV18, he said, “The story is good for all the midcap IT names; it’s just the valuation at which one wants to buy. One can argue that these are mid-cycle valuations, so valuations may look elevated. So, names like Birlasoft, Coforge of the world are trading at north of 40 times price to earnings multiples.”
“However, I would be more comfortable with the largecap names even if they are at a higher valuation, because if going is very good for a particular sector then large companies are going to get disproportionate benefits as opposed to the midcaps,” said Sonthalia.
However, Sonthalia is underweight on highly valued fast-moving consumer goods (FMCG) stocks. “On higher PE valuation, I am underweight on the FMCG space because I don’t think growth is going to be fascinating for us to justify the valuation and that’s why we have an underweight position,” he said.
For the entire interview, watch the video.