Stock market guru Shankar Sharma decodes small cap meltdown, says fundamentals ‘intact’

While the small cap stocks continue to remain under pressure, despite the Sensex fresh record highs, ace small cap investor Shankar Sharma says that the fundamentals in the space are intact. Decoding the bear markets, Shankar Sharma tweeted, “Two types of bear markets: fundamental & technical. Fundamentals in small caps are intact. So what’s caused the meltdown? Technical factors ie, trading curbs, hence low liquidity, hence forced selling into illiquidity, leading to a domino effect collapse on entire segment.”

After days of continued pain, even as the midcap stocks show signs of rebound, another top smallcap stock investor Porinju Veliyath says that select small and midcap stocks will outperform the likes of HDFC, HUL and even Bajaj Finance, stocks which have been in vogue of late. According to Porinju, this is a time for mid caps and small caps.

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“After this big fall I think this is the most exciting time when I look back in the last five years. Now is the time to really look into and load, some of the very selective of course. I don’t want to generalise too much. Selective mid and small caps- it is a wonderful time to pick with a very high margin of safety than the top quality stocks today,” Porinju Veliyath told in an interview to CNBC TV18 yesterday, adding that these stocks will outperform the likes of  HDFC, HUL & Bajaj Finance by a significant margin.

Interestingly, the big bull of Dalal Street Rakesh Jhunjhunwala too concurred that the majority of the correction in the small and midcap space is over, and markets are actually preparing for a second phase of up move. “There are a lot of excesses in the midcaps. We had excessive valuations, and I was shouting from the rooftop that this is not going to last. We have seen tremendous rise in the mid caps, stocks have gone from Rs 100 to Rs 500. The market have given up 40% of that gain, but still the rise is tremendous,” he said in an interview to ET Now.