Moderate rally in Samvat 2081; DIIs key drivers'

The markets are set to enter Samvat 2081 after a year where midcap and smallcap indices outperformed their larger peers. JIGNESH DESAI, chief executive officer of institutional equities at Centrum Broking, in conversation with Puneet Wadhwa in Mumbai, discusses how specific stocks in the largecap universe will continue to attract interest. He also shares his outlook on the midcap and smallcap rally, which he expects to persist over the next two to three years, albeit with intermittent corrections that could present buying opportunities. Edited excerpts:

- JIGNESH DESAI

How do you see the markets playing out in the next Samvat? Are your institutional clients willing to loosen their purse strings, given the road ahead for the Indian markets?

Indian markets have seen a steady rally over the past two years. With the general elections behind us, signalling continuity in policymaking, I expect the rally to maintain its momentum in Samvat 2081, albeit at a slightly more moderate pace. There is ample liquidity available with investors. While foreign institutional investors (FIIs) are being selective after the recent run-up, domestic institutional investors (DIIs) are always looking for new ideas to invest in and will be the key drivers.

Where do you think leadership will come from if the markets are to move higher from here? Which sectors could be a spot of bother?

We expect interest rate-sensitive stocks to perform well, given the anticipated rate cuts. Public sector enterprise stocks and niche sectors like solar and renewables may see limited upside.

Is it the right time to focus on midcaps and smallcaps?