The Executive Director and Chief Investment Officer (CIO) of ICICI Prudential Mutual Fund, S. Naren has recently clarified his statement on his statement on the very expensive valuation of midcap and smallcap shares. He advised investors to focus on saving the profits from these shares in the last 5 years. Although he has expressed confidence in India’s long-term growth story, it also said that at the moment midcap and smallcap shares have become quite expensive, investors should adopt diversification strategy to avoid risks.
This cleanliness of Naren came after his statement given in a program last week, in which he advised investors to completely withdraw their investment from midcap and smallcap shares. Naren clarified his position saying, “At least by February 2025, the focus of most investors should be on saving their profits. Those who have invested in equity or real estate in the last 5 years, have probably earned good returns. “
Comparing S Naren from 2013 to 2020, the stock market returns were extremely low at that time. Narne said that today’s challenge is not to make money, but to save it. He said, “Midcap and smallcap shares have become highly expensive at the moment, while largecap stocks look comparatively cheap and more balanced.”
Valuation disrespect
Naren attributed the FIIS for the difference of valuation between this smallcap-midcap and largecap stocks, who have sold more than Rs 1 lakh crore in large-cap stocks in recent months. Due to this, largecaps are now looking comparatively cheap and the prices of midcap and smallcap shares have become high.
He said, “It has been very rarely in history when midcap and smallcap shares have become so expensive, there is hardly any other example other than 2007.”
S. Naren has advised investors to diversify their investment in view of risks. He said that investors should adopt the correct mixture of investment in precious metals such as equity, date, real estate, gold-silver with global stocks.
He warned, “The best strategy is not to invest all the money in equity, especially in midcap and smallcap. SME IPOS and unlisted shares are even more risky.”
Cleaning about SIPS also
S. Naren also clarified his previous advice on the Systematic Investment Plan (SIP) and said that investors should continue SIP in asset class where the valuation is better. He said, “Today, largercap, flexicap and hybrid funds are giving better valuations than midcap and smallcap.”
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