'Retail SMID investors are losing sight of fundamentals'

Increasing retail interest in small and mid-cap stocks is similar to what happened in Indian real estate from 2004 to 2014 when retail real estate investors had lost the sight of fundamentals, believes Saurabh Mukherjea, founder and CIO of Marcellus Investment Managers.

- SAURABH MUKHERJEA, FOUNDER & CIO, MARCELLUS INVESTMENT MANAGERS

He tells Ananya Grover in an interview that investors should increase allocation to large-caps, stop doing F&O, and consider investing globally. Excerpts:

How do you see 2025 and what is your expectations in 2026?

The GST revamp and the income tax cuts that the finance minister had announced in the Budget in February 2025 were clearly effective.Add to that the 125bps rate cut by RBI and the real money gaming demand. There has been a discernible improvement in consumption which is being reflected in twowheeler and small car sales. The quarter to December in terms of Nifty earnings growth will be the first quarter after two years where we are likely to see a double-digit EPS growth. I am hopeful that in the next Budget, more income tax cuts will be announced. The RBI may cut rates by another 75odd bps. In the absence of more interest rate cuts, we could once again go back to consumption stagnation like the one happened in the runup to Diwali 2025. There are challenges around consumption, which is why these stimuli are required. We need a repeat of those in 2026.

How do you see all of it playing out in stocks and how much of it is priced in?