Investors looking to navigate the volatile stock market should adopt specific strategies tailored to different market capitalizations, according to Anshul Jain, Head of Research at Lakshmishree Investments. Speaking on BTTV's Daily Calls show, Jain outlined key approaches for trading large-cap, mid-cap, and small-cap stocks, emphasizing that a one-size-fits-all strategy is ineffective.
Large-Cap Stocks: Buy on Dips
For large-cap counters, Jain firmly advises a 'buy on dips' strategy. He suggests investors target large-cap stocks that have experienced significant corrections, specifically those that have fallen over 20% from their all-time record highs. This approach capitalizes on potential rebounds in fundamentally strong companies.
Jain provided several recommendations in the large-cap space:
- Bharti Airtel
- L&T (Larsen & Toubro)
- TVS Motor
- M&M (Mahindra & Mahindra)
Among these, he expressed a preference for L&T and Hero MotoCorp as top picks, noting their current beaten-down status presents an attractive entry point.
Mid-Cap and Small-Cap Stocks: Buy on Rise
In stark contrast to large-caps, Jain cautions against buying on dips in mid-cap, small-cap, and micro-cap segments. Instead, his advice for these categories is to 'buy on rise, sell on rise, or at stop loss.' This strategy acknowledges the higher risk and different market dynamics inherent in smaller capitalization stocks, where downturns can be more severe and prolonged.
Recent market performance highlights the varied behavior of these segments. The Nifty Midcap 100 index has seen a 4% rise this year, while the Nifty Smallcap 100 index surged 9.31% over the same period. This outperformance in mid-caps was attributed to a stable interest-rate environment and strengthening domestic demand. Small-caps benefited from improved earnings visibility and more reasonable valuations, with recent market corrections creating a more attractive risk-reward profile.
However, Jain noted that the recovery in these segments has been selective, with gains concentrated in a limited number of stocks rather than being broad-based across the entire mid-cap and small-cap universe.
“Never buy on dips in midcaps, small caps and micro caps counters. Instead, investors should buy on rise, sell on rise or at stop loss in such counters,” Anshul Jain stated.
Conversely, the BSE 100 LargeCap TMC index has experienced a 5.24% decline this year, reinforcing the rationale for a 'buy on dips' strategy in this segment.