Trust MF has launched a new small-cap fund amid concerns about expensive valuations in the space, with some stocks trading at 25-30% premium to the broader market.

In an interview with CNBC-TV18, Chief Investment Officer, Mihir Vora, who manages over ₹1,700 crore in funds, explained that not all small caps are overpriced. Also, the earnings growth of large caps is likely to slow down to single digits now. 

“I don’t think it means that 1,000 companies are expensive, Probably a part of the market is expensive and frothy like the extremely microcap, SME segment,” he said, noting that there are over 850 small-cap companies with market caps above ₹2,000 crore, offering plenty of investment opportunities.

If you look at the structural change in the market, 15 years ago the top 100 companies used to comprise of about 80% of the market cap. Today, it is about 60%. So it’s no a longer a concentrated market, he noted.

Similarly, four years ago, there were only 220 small-cap companies with a market cap above ₹2,000 crore, but now that number exceeds 800.

“The largest small cap used to be about ₹7,000 crore; today, it’s around ₹30,000 crore,” he noted.

The small-cap space is no longer niche, with 40% of the market cap spread between mid and small caps, providing a wide canvas, he added

Vora also highlighted the resilience of India’s market, despite $5 billion in foreign selling, noting that domestic liquidity remains strong.

India is becoming a broader market with many exciting stock picks. He believes that the global backdrop of easy liquidity will support both foreign and domestic flows, helping to hold up the market.

“India is a stockpickers’ paradise,” he said.

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Among sectoral bets, he likes premium consumption.

“In all segments of consumption the premium segments are doing very well whether it is in real estate, whether it is in consumer durables, whether it is in gems and jewellery, cars, two-wheelers – the higher end consumption is growing at a faster rate,” he said.

He also likes manufacturing and construction space.

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