Home Market Man who predicted midcap crash says time ripe to buy quality scrips

Man who predicted midcap crash says time ripe to buy quality scrips


NEW DELHI: Dalal Street crossed a milestone with a life high on January 29. But that was then. It has been on a slippery slope of late despite occasional sparks of brightness.

The correction has been sharp across the board. Midcaps and smallcaps have been bruised badly. The hammering has been so hard that some of the names have tumbled as much as 90 per cent from their January highs. And this has made investors scared like hell.

But Samit Vartak, the man who was spot-on in predicting the midcap pullback in 2017, shows no signs of worry. He believes that the ongoing correction in midcaps is normal in a bull market. And instead of worrying, people should tap this opportunity as such chances do not come often.

The Partner and Chief Investment Officer at SageOne Investment further says the good part of correction this time is it has corrected indiscriminately – whether it's of good quality or with a dubious record. And now, huge value is being created in quality companies.

However, for the bad apples, the pain is far from over. Hence, it's an excellent time for investors stuck in questionable companies to log out and move into good quality ones.

In Vartak's terminology, bad quality firms are those that did not generate cash flow while good ones measured up well.

According to Vartak, the median fall for top 1,000 companies has been 37 per cent. And many companies have come down by 50 per cent. But this time, good quality companies too have corrected by 25-30 per cent.

"I believe there is a huge value which has been created there. In the case of bad quality companies, there is much more pain left because they have gone up by 3,4,5 times. So, 30-40 per cent correction is not much for them," he explains.

Midcaps shot up crazily last year on the back of enormous liquidity in the market, Vartak says, trying to bring in perspective.

However, Vartak cautions investors not to make the mistake again — falling for herd mentality, hiding into largecaps and going for momentum stocks. "This is the time to think away from the herd," he signs off.

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