One of India’s best smallcap stock pickers says market ‘ripe with opportunity’

Mumbai: The bull market in Indian equities from the dramatic crash of March 2020 has helped the struggling smallcaps find favour among investors once again. The Nifty Smallcap 100 index has more than doubled since it hit an over five-year low nearly 14 months ago, reflecting the tsunami of buying in this pocket of the market.

Naturally, such a sharp linear move in one of the most volatile pockets of the Indian stock market has given rise to concerns about its sustainability, especially in wake of another wave of Covid-19 infections and related lockdowns in the country.

But for Axis Mutual Fund’s fund manager Anupam Tiwari, the story of smallcap stocks in India has just started.

“The excesses have now largely been normalised. For active stock pickers like us, the market is ripe with opportunity,” Tiwari told in an e-mail interview.

Tiwari is one of the emerging stars from the Axis Mutual Fund house. The man, in charge of managing assets worth Rs 4,850 crore under Axis Smallcap Fund, stood out during the grueling bear market in smallcap and midcap stocks back in 2018-2020. During the worst phase of that bear market in 2019, Tiwari’s fund was the only one that managed to deliver positive returns.

While Tiwari’s fund has lagged peers in performance over the past one year, it still ranks as the best performing smallcap fund for a three-year period with assets under management of more than Rs 1,000 crore, underlining the fund’s focus on longevity and consistency of performance.

The Axis Smallcap Fund has generated annualised returns of close to 19 per cent over the past three years, data compiled by SPA Financial Advisers showed.

“The vast smallcaps universe has always been a stock picker’s paradise, but only well-researched investors have been successful in creating long-term wealth in this space,” Tiwari said, as he touted that Axis MF’s investment philosophy is grounded on boots-to-the-ground research.

Tiwari said the bull market in smallcap stocks is different this time. “The difference today compared with the last cycle is the financial stability in many smallcaps, which have resulted in their resilience. Promoters and managements have been focused on bringing down costs relentlessly in a thrust towards business efficiency,” Tiwari said.

That said, Tiwari acknowledged that the return of lockdowns is going to hurt earnings of this space of the equity market in June quarter, but said “the longer-term growth trajectory continues to remain on track.”

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