Midcaps overvalued, seeing opportunities in smallcaps

The extent of overvaluation is significantly higher in mid-caps compared to large- and small-caps, according to Rahul Singh, CIO – equities, Tata Asset Management Company.

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He tells Ananya Grover that if the profit growth bounces back, markets will be able to sustain these valuations. Excerpts:

What are the global factors impacting the market?

Globally, because of higher risk on the dollar as well as US assets – debt and equity – a gradual shift is happening away from the US markets to gold and emerging markets. It is going to continue for some time because the opposite of this happened for years. China, too, is recovering and its technology sector is getting attention because of the DeepSeek development. The US equity market became highly overowned as the market cap is 65-70% of the world market, which is going to correct gradually. A weakening dollar also drives people to put money in emerging markets. This has just started, it can continue for a long time. While China will lead these flows, India will also benefit because most of the investment flows through emerging market funds.

Are you concerned with the domestic macro situation?