Vinay names 7 specific segments of the market which are in bubble zone, which he advises investors to stay away from: (1) poor quality& low growth small caps, (2) poor quality and low growth midcaps, (3) poor quality newly listed IPOs, (4) SME stocks and IPOs, (5) PSU stocks, (6)industrials and cap goods sector and (7) real estate sector.
Large parts of the market outside these spaces are at reasonable valuations – especially good quality stocks (high growth, high RoE)which as a segment have underperformed poor quality stocks (low growth, low RoE) significantly in the last couple of years – and could now be the beneficiary of rotation.
PGIM India’s new Large & Midcap Fund will focus on high growth, high RoE large and midcap stocks which are available at reasonable valuations amidst bubbles elsewhere.
Expect the new fund to be overweight pharma, healthcare, private sector banks, select NBFCs while remaining underweight in materials /commodity stocks.
The fund will be well diversified and will maintain high active share relative to the peer set, even as the effort will be to maintain a low churn portfolio.