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MUMBAI: Veteran asset manager and founder of Abakkus Asset Manager, Sunil Singhania, believes the recent drawdown in shares of midcap and smallcap companies has been healthy as “money making was becoming too easy.”

“Frankly, in the last six-to-eight months, money making was becoming too easy… you see some tweet, you buy the stock and it is up two circuits. Sectoral rotation was very, very fast,” Singhania said at the launch of Abakkus Smart Premier League in partnership with Kotak Securities.

“Everyone was having a gala time. When money making becomes too easy, it is a sign that something is going to come by way of a correction,” he said.

In August so far, the Nifty Midcap100 and Nifty Smallcap100 indices have fallen 3 per cent and 6 per cent, respectively. At individual stock level, smallcap stocks on an average have seen a correction of more than 20 per cent from their recent highs.

“This correction is a reminder (to investors) to not invest or trade in stocks on the basis of hearsay and only on momentum. Momentum is good till you are on the right side,” Singhania said.

The veteran asset manager said he expects the market to remain rangebound in the coming two-three weeks before optimism comes back from a good festive season. He sounded optimistic on the festive season and its impact on corporate earnings, as he believes there could be considerable pent-up demand on re-opening of the economy and a ‘decent’ monsoon season.

Singhania said he was getting constructive on the capital goods and cement sectors due to emerging signs that the capital expenditure cycle in the country may be picking up after lying dormant for the better part of the past decade.

However, his preference lies with shares of non-lending financial services companies such as stock brokers, insurers et al, as he seeks to bet on the financialisation of household savings, which he feels will continue in India. Singhania also expressed optimism on the information technology space.

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