Rapid Growth for a Year Won't Justify Present Valuations

ICICI Prudential’s Mrinal Singh believes that without a meaningful pick-up in growth, it’s hard to see the current mid-cap rally being sustained.

- Samar Srivastava

Mrinal Singh, 38, deputy chief investment officer (equity) at ICICI Prudential AMC, tells Forbes India that looking for reasonably priced businesses with a long growth runway is still the best way to build a portfolio. And it doesn’t matter if you miss some richly valued companies in the process. Excerpts:

Q How sustainable is the present mid-cap rally?

For businesses to justify these elevated valuations, it will require them to deliver on a sustained basis. If they grow rapidly for a year or two, they will not be able to justify them. If we look broadly at mid-caps, they are richly valued—the mid-cap index is close to 25 times. So the question is whether we find large-caps more attractive, and the answer is yes.

Q do you think the fall in interest rates and an improvement in india’s macroeconomic environment have a disproportionate impact on mid-cap stocks?