Large-cap stocks offer maximum comfort amidst challenging environment: UTI AMC
Vetri Subramaniam, CIO of UTI AMC's view — largecaps being the most comfortable, followed by midcaps and then smallcaps being the least comfortable — has been consistent over the last three months. However, he said he was surprised at the strength the smallcaps have shown in this period.
Vetri Subramaniam, the Chief Investment Officer (CIO) of UTI Asset Management Company (AMC), has expressed his assessment of the current macroeconomic landscape, noting that it presents challenges for mid and small-cap segments, while large-cap stocks offer the highest level of comfort.
In an interview with CNBC-TV18, he emphasised, "When we consider the macroeconomic scenario, particularly for the mid and small-cap segments of the market, it does not appear favorable. In contrast, large-cap stocks are where we find ourselves most at ease."
Subramaniam's remarks come against the backdrop of elevated global interest rates. He holds the view that the prevailing macroeconomic conditions suggest a prolonged period of higher interest rates in India, a trend that is mirrored globally. He remarked, "Global growth, particularly in the US, is proving to be resilient. However, this should not be interpreted as a rampant expansion. Therefore, we cannot rely on robust global growth to propel our market."
He consistently maintains his perspective that large-cap stocks offer the most stability, followed by mid-cap stocks, with small-cap stocks being the least reassuring. This viewpoint has remained consistent over the past three months. He did acknowledge being taken aback by the resilience demonstrated by small-cap stocks during this period.
Examining market trends, Subramaniam contends that mid-cap stocks deliver superior returns compared to their large-cap counterparts. He elucidated, "Upon scrutinising data over extended periods and adopting a rolling basis analysis, it becomes evident that mid-cap stocks emerge as the most appealing market segment in terms of both returns and risk-adjusted performance, outshining large-cap stocks. However, the same cannot be asserted for small-cap stocks."
Subramaniam further pointed out that small-cap stocks present the least comfort when considering valuations. He cautioned against placing excessive emphasis on year-to-date or even three-year data, suggesting that these time frames may be influenced by a particularly favorable baseline for small-cap returns. To gain a more accurate perspective, he advised extending the horizon to five or seven years, a shift that could yield markedly different results.
Also Read: Bank Julius Baer predicts extended high interest rates based on US Fed's data driven decisions
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