No harm in investing in mid-caps, small caps, but choose wisely: MOFS' Ramdeo Agrawal

Nifty has been hitting lifetime highs recently and large-cap stocks have been growing and have become very "hyper". Will the small-cap and midcap stocks, which have shown good promise since the beginning of 2020, continue to do well, going forward? Motilal Oswal Financial Services' Ramdeo Agrawal explains what could be the scenario for mid-cap and small-cap stocks.

The mid-cap and small-cap stocks have been doing well since the last 15-20 days, Ramdeo Agrawal says adding that the investors should invest in the stocks of good companies and include them in their portfolios.

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Agrawal, however, cautioned that investors should be very careful and choose only those stocks that could give good results. 

Agrawal also said that he did not believe that the investors should start selling large-cap stocks to invest in mid-cap and small-cap stocks believing that they would double the returns. 

Many mid-cap stocks have corrected and if the investors find one or two stocks that are promising, they can go ahead and invest in those stocks, he added.

Agrawal also said that the market regulator Securities and Exchange Board of India (SEBI) should also look at the definition of mid-cap and small-cap stocks for mutual funds. He further said that it was wrong to restrict the mid-caps which are now between 101 and 250 as the companies above 250 levels do not have a natural flow in the mutual funds, Agrawal said.

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If an investor is not buying the stocks in mutual funds then why will they even buy stocks of these companies individually, he further said. This has impacted the IPO market as well, the Chairman pointed out.  

Agrawal also said that the low-interest rates all across the globe were helping economies. This coupled with almost negligible inflation across the world were aiding the markets, resulting in a boom. The Indian equity markets have also seen a good rally since the start of the year, riding on the good show in US markets and because of positive sentiments that have developed around the US-China trade deal, he added.