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Small- and mid-caps appear attractive, but watch out for working-capital ratios

Small- and mid-caps have been out of favour this year as Dalal Street has opted for the relative safety of blue-chips. While valuations of the smaller companies are now looking attractive after the correction, investors would do well to examine their working-capital ratios carefully in the wake of the systemic liquidity crunch since these numbers will make or break them.
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pravin
22 Oct 2019 4 Mins Read 4 comments
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Investors seek refuge in blue-chips in uncertain times. And this trend has been visible in 2019 with the Indian economy slowing down sharply. Indeed, small-and mid-caps have been off the investors’ radar in the recent months. Over the last one year, the NSE small-cap 250 index has shed 8% and the mid-cap index is up 2.3% while the large-cap
says a fund manager. Clearly, investors need to exercise caution, and it is a stock picker’s market. “The valuations of these companies are very attractive, but investors have to be selective in buying. Companies without any debts are finding it difficult to raise working capital,” points out Abhimanyu Sofat, research head at IIFL. ( Graphics by Mohammad Arshad)
Investors seek refuge in blue-chips in uncertain times. And this trend has been visible in 2019 with the Indian economy slowing down sharply. Indeed, small-and mid-caps have been off the investors’ radar in the recent months. Over the last one year, the NSE small-cap 250 index has shed 8% and the mid-cap index is up 2.3% while the large-cap says a fund manager. Clearly, investors need to exercise caution, and it is a stock picker’s market. “The valuations of these companies are very attractive, but investors have to be selective in buying. Companies without any debts are finding it difficult to raise working capital,” points out Abhimanyu Sofat, research head at IIFL. ( Graphics by Mohammad Arshad)

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