Are Small And Mid Caps Too Expensive Aditya Khemani Explains

TITLE: Are Small & Mid Caps Too Expensive? Aditya Khemani Explains CHANNEL: Value Research DATE: 2025-09-04 ---TRANSCRIPT--- [Music] Hello and welcome. Today we have with us Aditya Kimmani. He’s fund manager at Invesco Mutual Fund and under his watch some of Invesco’s key funds across midcap, small caps and more have delivered strong returns standing out among peers. So today let’s ask him how he’s navigating the stretched valuations. what gives him conviction in today’s market in his stock picks and what should investors realistically expect from here on. Welcome Aditya.

Thank you so much Rocher. Thank you so much Cher for having me on the show. Good to have you here. Um Adita let’s start with the big picture. So M and small cap valuations they still look elevated despite the recent runup. So do you think earnings growth can keep pace or are we staring at the risk of disappointment? Look Roer when we talk of equities earning risk will always be there. Okay. So there’s no way you can run away from earning risk. I mean good markets bad market good economy bad economy that is something you have to take it in the stride. But I think point being that whether you’re an investor for the next 6 month next 1 year or you’re an investor for the next 5 year 10 year that makes lot of sense from that perspective. So like in case you’ve come into the market 5 year back, 10 year back, it wouldn’t have mattered whether earning risk would have come for which quarter and would have impacted your return. But had you come in two quarters back, 3/4 back and earning risk would have come in, it would have mattered. So point being that earning risk will always be there. It is there at this juncture also. But the moment you start thinking about the next 3 years, next 5 years, the next 10 year, it become much more clearer from that perspective. Arita with the slowing global growth easing inflation and the prospects of the more rate cuts uh what’s your outlook for the Indian markets going forward again chag if we look at Indian markets firstly look markets is a function of economy in case economy does well markets will do well so I’ve been in the market for now 20 years probably the Indian economy the macro what we are right now probably that is the best we’ve seen over the last 20 years so that is one point secondly on the micro side even though macro might be great. There will be some cyclical correction which happen in the economy at different points in time. So we went through from 2020 to 2024 we saw a goldilock period from a economy point of view. I mean everything was recovering and people were excited from that perspective. But uh last one year or last one year and a quarter maybe things have not been very great from that perspective because as I said cycally uh the rate increases and all those things and monetary tightening tightening what happened in the economy that had an impact in terms of economic slowing down over the last four five quarters but we’ve seen two quarters back the RBI has done taken lot of steps to maybe recover the economy also the government has also doing its bit in terms of making sure that the economy refers back from that perspective. So no one knows it takes time two quarter, 3/4, four quarter at some point in time our view is that over the next four quarter at some point in time you will see things uh coming back to normaly from that point of uh point of view. But having said that it will be very gradual recovery. I mean we are not expecting that I mean it will be a hockey stick recovery from that perspective. It will be a very gradual recovery at the margin quarter after quarter over the next three four four quarters that is a base case view what we have but uh if we look at the midcap and the small cap segment do you think the earning growth particularly in these both the segments small and midcap can justify the current valuations or are we in the zone of you know excess optimism chak again valuation is something it is very very subjective from that perspective I mean honestly When people look at valution, people simplistically look at what is FI26P or FI27P and they can come up with a judgment that this stock is expensive or this stock is expensive from that perspective. But if you look at lot of company India is a growth market for most foreign investors and Indian investors. And when you look at most most growth stocks 60 70% or maybe more than that valuation value comes from maybe value which is terminal value which occurs beyond next 10 year from that perspective. So uh I mean next FI26P or FI27P from that perspective becomes a very simplistic exercise on an overall basis. So I would say that on an aggregate basis I will say market may be 20 25% expensive but then in case you are backing a company which can grow at 20% plus earning growth for a long period of time I mean I mean it doesn’t matter obviously it matters when you buy expensive but even if you buy 20% expensive for a company which can grow at 20% for the next 5 7 10 year I mean your return will not be meaningfully different than the earning growth maybe next 10 year earning growth is 20% kagger the stock price compounding could be 17 18% kagger if you buy 20 25% expensive from that perspective that’s why we don’t worry as much in case a stock becomes 20 25% expensive but then in case a stock is 40 50% expensive obviously uh that is a that is something a clear no-go area from our perspective and clearly we avoid that space so as long as the growth continues you are happy holding that stock no not just growth. Look, you have to again look at a company from lot of matrix. Uh obviously we are high growth investors. I mean in case I can share my framework. Uh one is obviously high quality and high growth investors. But then these are two very important things. But then cash flow conversion has to be good and these are three important things but then at the end of the day valuation also needs to make sense. You cannot keep on buying any company at any price because then we’ve seen TMT bubble what happened in 2000. I mean lot of companies IT companies which were trading at that point in time they have not made a lot of money over the next 20 25 years even though the earnings have gone where they have gone. So from that perspective valuation is important but then 15 20% valuation being expensive is still okay from that perspective. I mean you cannot pay a 50 60 70 100% uh over premium from that perspective but some over premium look again we are living in a market where liquidity is chasing lot of good companies and then when liquidity chases lot of good companies it is very difficult to get lot of hard bargain from that perspective. So there’s a call you need to make either you stay uh stick to good companies good quality companies with reasonable good earning growth or maybe you sell those companies or maybe buy companies which is a notch lower down on the quality curve notch lower on the earning growth. So there’s a trade-off which an individual investor needs to make depending on his investment philosophy right but midcaps in particular they have seen a sharp rerating and are trading at historically high BS. So does their growth potential justify this or does it raise the risk of a sharp correction if earnings tumble? Look again but midcap is a very wide basket. Okay, people use a midcap basket in one homogeneity from that perspective. But again, if you look at midcap composes of so many different business models, so many sectors that’s why I mean in a in an era from 2020 to 2024 when everything did well, all sectors did very well. I think the next 2 three year is going to be meaningfully different than that phase. uh it has to it will be much more stock specific focused because in that four five year time frame you’ve seen lot of companies have become expensive lot of business model which were not very great those have also started enjoying very high multiples so that’s why as an investor I think one needs to be very choosy where one needs to get into from that perspective over the next two three year it will be very stock specific from that perspective that’s why I made that comment in case a business model is good in case you’re convinced means that the earning growth could be probably closer to 20% for a reasonably long period of time. I mean I don’t mind mind paying a 20% premium from that perspective. So valuation on an aggregate is expensive. Uh there is there are chances that earning disappointment happen. Uh there will be correction in stock price but then as long as I mean you are aligned you think like you’re a investor which is investing for the next 3 5 10 year. I mean those short-term aberration correction doesn’t matter as long as your investment argument comes out right at the end of the day. Now Ari you spoke about your investment style but u uh you always emphasize on bottom stock picking. So what’s the framework you use to identify high quality businesses and more importantly to hold on to them through across the different market cycles. Look uh I mean Chilag as you rightly said we are bottoms up stock picker from that perspective and uh when you go about bottom of stock picking uh at essence we are high growth high uh quality uh house from that perspective but within high quality uh high high quality and high earning growth you can break up a philosophy into a maybe a quantitative framework and a qualitative framework and as long and in terms of quantitative ative framework I think today I mean if you ask most quality investors it doesn’t vary too much I mean people want high earning growth people want high ROC people want high cash flow conversion people don’t want too much leverage on the balance sheet so our ask is also not too different on the quantitative side but I think on the qualitative side is where the differentiation comes in because look quantitative thing is I mean you can at best estimate for the next 2 three year what the earning growth will V but beyond that what because today as I said stock price or stock value is maybe 70 80% composed of terminal value which you cannot see and feel actually so that’s why quantitative factor becomes very very important so today in our interaction with management lot of time goes in terms of understanding the softer factors for example I mean for me the management or the promoter is very very important so I call them the jockey actually so jockey is very very important because when you place money on a company how is a top guy become very very crucial because in case he does well he his policy is good the company will move in the right direction so what is the hunger the promoter has in case look a lot of these midcap people use a midcap company I mean as if they are very small these midcap companies make 400 500 600,000 to a profit so they are no but I mean they are not small from that perspective so it is very common for these promoters to become complacent actually after that uh at that uh level but then as an investor you have to see does these promoters have the same fire in the belly to make them large cap companies at some point in time so I think for me that is very very important uh when you judge a promoter then you have to see look again a promoter cannot carry by himself he needs to have a good second team from that perspective he needs to professionalize a company because I mean again if you’re looking at investing from a longer term you want a 10bagger from that perspective I I mean the same guy a promoter can take the company from 0 to 1 but taking a company from 1 to 10 will require a totally different mindset. So then I mean whether that promoter is open to getting new professional people paying them very well from that perspective become very very important. How is the culture of the company is attrition very very high or low from that perspective. So then the software factor become very very important. So uh the promoter is important. Secondly, the industry also become very very important because look, I mean no matter how good the promoter is, in case the industry is a slow growth industry, it is very difficult for that company to grow at a faster rate for long period of time. It can grow maybe 1 year, 2 year, three at a fast rate, but at some point in time the industry growth rate will catch up with that company. So the uh so that company has to be part of an industry which can grow at a fast rate for that for a long period of time. here obviously I mean you have to visualize suppose let’s take a sector like hospital you have to visualize that maybe this sector there’s lot of scope for value migration to happen from smaller hospital to larger hospitals because corporterization is happening and then then you have to bet money on those jockeyies who can maybe scale up and become much larger at some point in time so because I mean ultimate wealth creation happens when when there’s a ultimate marriage of a good promoter and a business. So these are two very very important things which I look for uh on a qualitative qualitative aspect in the in the companies we have in our portfolio. I know Adita if we move forward to the some fund specific question the inves large and the midcap fund has done reasonably well in the in the past few months or so. So what has worked for the scheme where is the whether it is a stock selection sector performance or the overall t in the market? took again uh Chira I mean last one two years as I said 20 2020 to 2024 everything was doing good actually at that point in time it was very difficult to differentiate which is a good business model which is a bad business model so there were there there had to be a method in the madness where you have to go about so as a house what we had done we had chosen some themes which were much more structural in nature and so we I mean we chose those themes which were not there was they were not fads. We thought those themes can grow for the next 3 year, next 5 year at a high rate and then from a top- down view then we went about choosing the companies or the jockeyies or the promoters which could do their best within those themes. That’s why uh the portfolio was constructed in a way that uh that were positioned in those themes and uh in managements uh which were very uh which were doing very well within those themes. So it was a portfolio which was very sharply positioned. We were not like 80 90 100 stocks in the portfolio. We were like maybe around 45 stocks in the portfolio on an aggregate bas. So it was a very sharply positioned portfolio and the themes uh we wanted to play and look again I mean macro one year back it it was looking like macro is slowing down. I mean people took notice in maybe June quarter last year post election that macro is slowing down. So at that point in time I mean how do you then create alpha? How do you create money for the investors? Then that point in time again you have to choose themes which can do well irrespective of things slowing down. For example like um some of the themes like maybe your quick commerce I mean the theme was doing well uh due to disrup it was it was a disruptor which was disrupting the traditional channels of distribution. So it was growing on its own. It did not need any macro support from that perspective. a theme like hospital again value migration was happening from unorganized to these corporate hospital it did not and it’s a nondiscretionary consumption from that perspective it did not need any macro support from that perspective again one more theme financialization I mean again financialization is a longerterm theme where people are moving from a physical asset to uh to financial asset again that theme was doing well irrespective of macro slowing down so we positioned our pets in terms of some of these themes which could do well in spite of macros slowing down. I think so that uh helped us a lot and on an aggregate basis because you asked us that question whether stock selection helped you or se uh sector selection helped you look I mean for a fund manager there are two ways to create alpha one is called the allocation effect the second is called the selection effect and in case we see last 12 month performance 80 85% of alpha has been created out of selection effect and that and that is not just for large and midcap that is for midcap and that is for small cap so because as as As I told you, we uh we we pride ourself from a bottom-up stock selection perspective. We don’t want to take big bets on the sector side and then I mean because look sector calls can go right at some point in time. They can equally go wrong at some point in time. So we don’t want to be at the mercy of the market that uh we want to be up one day and down one day. So stock selection is I think what has uh helped us on an aggregate basis uh do well the way we’ve done over the last one year. right now um this large and midcap fund it also runs a higher relatively higher midcap exposure compared to its peers even when large cap stocks look uh attractively valued so what is driving that positioning look again rucher if you look at uh if you look at the larger midcap fund today large cap is around 40% of the fund and midcap and small cap is around 60% that is the allocation at this juncture and if you look at the benchmark benchmark will be around 50/50 between large and midcap. So we are probably I mean higher index to the mid and small cap part of the market. So here I know that lot of people have come out and said large cap looks cheaper from that perspective. But again one is optical cheapness. The other is what is the earning growth of those companies. So when we look at because I manage large, mid and small across. When I look at the large cap segment, lot of these large cap companies have become very big actually. So they cannot grow much larger than the GDP growth rate of the company because they are present in segments which have matured like a lot of these probably IT majors the IT services is a matured segment from that perspective and some of these companies like 2030 billion revenue. So you cannot expect them to grow at a rate faster than than the economy and then so I mean they will be optically cheap. So they will be available at 18p 20p from that perspective. So I mean the large cap index because this comprise of lot of these companies optically they look cheap but then they lack that uh earning growth beyond a point. So in my view large cap as an aggregate basis probably they will go closer to the GDP growth rate of the uh country and in case one is looking for a higher earning growth probably mid and small cap part of the market is where you’ll get higher earning growth and because where we position these funds is high earning growth and high quality fund we want earning growth to be high across our funds and most of our funds earning growth will be closer to 20%. And that can only be achieved if we give if we have a higher share of midcap and small cap uh on an aggregate basis overall in that fund. But again look lot of people conrue that because it has a high midcap or high small cap the risk character of that fund will be high. But that might not necessarily be true. For example, if you look at a sector like healthcare, healthcare is a big sector across funds. I think in the large and midcap also it will be 18 19%. In the small cap it will be 20% plus. In the midcap it will be 20% plus. We know that healthcare is a very defensive sector. So and and most of these healthcare stocks we have is in the small cap in the midcap space. So even though we might have lot of small cap and midcap but in case they are present in a sector which is much more defensive. So so then it helps you during bad times also. So that’s why I want you I want people to take out that feeling that small cap midcap means risky from that perspective because it’s not that small cap or midcap makes a company risky. It’s a business model which makes uh it risky. Even a metal company even a large metal company will be risky but even a small cap hospital stock will be less risky from that perspective. So it’s a business model which makes a company risky or less risky from that perspective. That was one point. Second thing again there’s lot of uh I mean people think midcap is very risky from that perspective but again if we go back to the definition what is midcap midcap is uh 101 company to 250th company in India these are not small companies the 101 company the which is the largest midcap companies makes a profit of 2500 2600 cr it has a cash of 8 9,000 cr on the balance sheet how can you call a I mean a company which is earning more than 2500 cr no debt on the balance sheet to be a uh to be a risky midcap from that perspective probably so midcaps has to be seen as a as a as a smaller large cap on an aggregate basis the moment so I see midcaps as smaller large caps and I see small caps as more like midcaps and within the small cap also again I break up the small cap again you know small cap is up till broadly around 30,000 market cap so today if you break up the market cap of India India’s market cap roughly is $5 trillion. Um 60% will be large cap, $3 trillion, $1 trillion midcap, 20% and $1 trillion small cap. Uh and within small cap there are 350 companies. So within that so less than 10,000 cr small cap is where I would say the risky one and we have very less exposure to that. So in a small cap fund also a small less than 10,000 cr market cap would be 5 6% of the fund actually. So that’s why I mean people look at what is a midcap and small cap composition of the fund. But when you look at what sector you own within the midcap and small cap one and secondly which part of the market cap you own in the midcap and small cap that is what matters much more to me rather than seeing optical large mid and small cap in the fund. If you look at the midcap invest midcap fund, it has a it had a tough phase in 20 22 22 and 23 but I staged a sharp turn around 2024. So what changes helped those turnaround in the in the fund? Chag I took over the fund in November

2023. So, so, so probably that was a change but uh I mean keeping that aside look I mean again when I took up took over the fund as I told you I mean those three four years were like roaring hot market markets were just roaring like anything. So then you need to put your head down and see where you need to put your money. So again m bit midcap is a very broad basket. So as I said earlier we chose what themes to put money. So we identified six seven eight themes which look attractive from a longerterm point of view and some of the themes I have already spoken earlier and and these are themes I mean which might grow irrespective of macro actually macro might slow a bit still these these themes will grow they might be due to disruption they might be due to that company might be gaining market share I mean there might be different reasons for those companies doing very well so that’s why that was a top- down view from that perspective and secondly bottoms stock selection within that. Secondly, again I mean we brought down the number of holdings in the in the portfolio. I mean that time it used to have 80 names in the portfolio. We brought it down to maybe less than 50 names. At this juncture we have 48 names in the portfolio because look again I mean when the economy is slowing you cannot have a very large portfolio because it is very difficult to then position your portfolio in the way you want to position. you need to sharply position it. So that’s why sharply positioning it in the themes we wanted uh with maybe less than 50 stocks was a good enough because I think less than 50 stocks serves that purpose of positioning your portfolio in a good way at the same time it helps you diversifies from that perspective because you might ask me that I mean does it increase the concentration risk from that perspective but we said that we might reduce the number of holding but we will not breach that 5% top holding in any of our fund so we will I mean we’ll be closer the top holding will be closer to that 5% holding it will not go up to 7 8 9% because we need to be cognizant of the volatility what is prevalent uh uh across the market from that perspective so that was one change in terms of top-d down focused bottoms up stock selection focused u number of reducing the number of holdings uh risk management focused so these were three four key changes and again one more thing There were a lot of sectors which were doing very well like uh industrial as a sector was doing very well one and a half two years back. Defense was doing very well one and a half two years back. I mean it was clearly visible that the stock price had run up ahead of reality because I’ve seen in 2007 8 these companies that were trading at seven time eight time price to sales and 40 50 times P. This is a cyclical sector and when it’s a cyclical sector where margins were trading at the top of at the peak you cannot pay such high multiple to a sector like industrials from that perspective. So we reduced a large share of industrials in our portfolio that helped on an aggregate basis from that p because I mean how we think in this portfolio we don’t think that this fun this portfolio can underperform next 3 month next 6 month we don’t chase momentum at all we will think I mean whether this stock this sector will help us next one year next year that is a thought process so whenever there’s a momentum I mean we are happy to let go of that momentum from that perspective like for example there’s a momentum in auto stock recently I mean we happy to reduce some bit of auto exposure in the overall momentum. So that’s the overall approach in terms of being stock specific thing focused uh uh controlling the risk from on an aggregate basis and these are three four things in an aggregate basis it’s a I mean 20% plus roe portfolio 20% plus earning growth portfolio that’s the key m and one more thing I will share chak I mean in my years of learning one thing I’ve realized is that um you can be a high growth uh high earning growth investors but then you cannot have a portfolio which is completely very high PE portfolio because when growth investing does well your portfolio does very well but when the tide turns I mean your portfolio gets loggered from that perspective that’s why having a good balance is very very important in the portfolio that’s why at all points in time if I look at the portfolio 60% will be broadly growth style of investing and 30 40% will be value and graph style of investing that’s why I it doesn’t matter to that which style of investing does well in the market whether growth is doing well or value is doing well that’s why in a year like last year when growth was doing very well we did very well last year but this year also when growth has got punished you can see a performance has been at the top this year also because it’s a very balanced portfolio because ultimately the portfolio has to be a good balance because I mean objective is to be give much more consistent performance rather than give be at the top one year and be at the bottom from the other year. So these are three four things approaches which helped us uh in terms of turning around our midcap fund.

But Adita is is the same reason even for the small cap fund because in the last 3 year the rolling returns you know on the three-ear consistency dipped close to zero before recovery. So uh is this the same reason even for the small cap fund? Yes look I mean across a fund the style remains same. Okay. So small cap also you’ll see similar theme at play similar bottoms up stock picking at play from that perspective. So it’s a similar style and again over there you’ll see healthcare as a space be one of the top sectors financial as a space be one of the top sectors uh consumption as a space be one of the top sectors industrials we’ve cut down uh overweight in that sector. So on an overall basis the same reason uh which uh runs through most of our fund because look as an investor when you’re running one fund I mean your thought process cannot be very different while running different funds because I don’t want to run that fund saying that uh I mean let me run this fund in aggressive way and let me run this fund in a slightly different way so that at all points in time one fund will do well and one will be done we don’t run like that whatever be our best approach we try to run most over funds in a similar approach. Another thing on the on the small cap thing only the 2024 stands out with nearly 13% outperformance compared to the BSC 250 small cap TR. So uh you have spoken about what has driven this performance but can investor expect such a gap to sustain even going forward? Chak as in had you asked our team or me one year back will you deliver some the outperformance we’ve delivered? I mean no one can visualize what output. You cannot control the output. What you can control is a process and ingredients which go into that process actually. So we are trying a level best to do whatever we can. But then having said that the gap the outperformance is so large I mean one should not expect that outperformance I mean going ahead from that perspective but what I can say for shortity is that we’ll try our level best to do whatever we can do because I made you understand our style what we are looking for and we are long-term investors and we don’t believe in getting in a company getting out in a company we want to back good companies in the small and midcap where we can stay for the next 3 five And that is a entire approach in terms of fund management we have as a team over here. Right? Since we’re talking about small caps, uh liquidity in small caps that can be a double-edged sword. So how do you ensure scalability and exit discipline while managing this segment? Look, liquidity is important. Roger obviously that’s why I mean look most of your hard work should go when you before you include a stock in a portfolio. So in our place I mean before we include a stock in our portfolio a lot of work goes into that. So I mean it takes one two month for analyst to do work on that company before a stock gets included from that perspective. And in case it’s a small cap company the amount of work which goes into that is all the more from that perspective. That’s why I mean the conviction in a small cap company has to be much more uh than a midcap or large cap company from that perspective because I think in case you’ve done your homework well at the time of inclusion the liquidity risk is taken care of in to a large extent because look I mean lot of in lot of these cases uh some of these stocks is a one-way street I mean you can get in but to get out is really really difficult uh from that perspective liquidity is a challenge I will But then you need to refine your process as an investor uh before you get in and that’s why I mean when you when you do research on a small cap company uh which is maybe an IPO company you need to do a lot of checks especially on the promoter through a channel checks on maybe competitor on through ex employees lot of channel check you need to do as to how the promoter is and all those things you need to so lot of things you need to do uh much more in a small cap uh before you get But having said that you know that some time back released that guideline for liquidity monitoring across uh small cap and midcap funds. I mean what I remember vaguely is that I think a quarter of a fund could be sold over a 5 day time period in case uh redemption warrants that amount of uh that amount of liquidity from that perspective. So I mean look selling is not an uh not a not a problem but only thing is problem is that suppose you get stuck in a wrong company and you have to make an exit. How do you make an exit? That is an challenge for sure but only way to only way to overcome that challenge is maybe to take smaller bets in small cap. One is that then secondly uh do much more work before you get into a small cap at the time of start. These are two things you can do to mitigate those challenges. Arita, recently the small cap fund has increased the allocation to relatively bigger small capsu compared to the earlier to tilt towards the smaller ones. Is this a conscious shift towards stability or more byproduct of the opportunity which arises in the market? Well, look again chill this is a conscious shift. Uh our fund size is also growing. Okay, with fund size you need to be cognizant of the risk associated with those fund size. So from that perspective uh as I said earlier small cap is up till maybe 30 32,000 cr market cap. So below I think 8 9,000 cr market cap is where companies use are much more volatile from that perspective. So we’ve positioned much more in more than $1 billion market cap in 89,000 cr market cap to 30,000 cr market cap below 89,000 cr market cap is hardly 5 6% of our portfolio. So we that is by design and by choice and we would like to stick to that because that is again out of experience that in in cases where uh we uh where things did not go well we found it very difficult to u exit those stocks from that perspective. So it’s better to maybe I mean stay away from that part of the market when liquidity is getting more and more difficult inventory. Okay. Okay. Uh Adita would you agree that the small cap fund is not entirely buy and hold kind of strategy and roughly what’s the share of the portfolio would you classify as a opportunity uh bets in in the market? U I will beg to differ that uh I mean most of our portfolios would be in a buy and hold approach from that perspective. So and more so in a small cap space because we are talking about liquidity being challenging and especially at the at the small cap end liquidity is a big challenge and suppose you take tactical bets in the portfolio to get in and get out is becoming very very difficult from that perspective. So I mean generally I mean in my thought process I don’t take calls I mean less than one year two year from a time frame perspective there’s never a case where you think minimum thing then you’ll see what happens. I mean obviously there there are cases where investment argument has not worked out as per what you thought and maybe you need to exit before that time frame that happens one is that and secondly look market as I said is market prices in a stock very very fast. So in lot of these cases uh there market market has rewarded a company very handsomely. So it makes sense to maybe take money at in some of those cases. So so that’s why I think approach towards I mean like 10 years back my approach towards investing was more like playing a test match but I think my approach now towards is being slightly more agile from that perspective. So maybe it’s not yet a 2020 from that perspective but what I will say is that you need to be more agile and you need to maybe keep an eye on what are the disruption happening uh to because cycles are becoming much more shorter from that perspective. I mean disruptions are you can you will not be able to see I I can tell you that I like this company for the next 10 year but I mean two year later some disruption will happen. So that’s why you need to be much more agile from that perspective. So there even though there’s no churn ratio from that perspective I monitor but across my funds what I see is that churn ratio is around 40%. And within that 40% you know that large bid and small every 6 month releases a list wherein so many changes happen like in this review itself 10% of a small cap became midcaps actually. So what do you do in that case? So that’s why you need to keep changing your small cap midcap to make sure that you adhere to that 65% in small cap or 65% midcap. So some bit of churn is also triggered to that. So because of these agile agility and all these things some bit of this but generally thought processes when you buy the small midcap company you think of the next two three year at least before taking a position in these companies. Right. Althia one last question. Um given how sharp the rally has been, do you expect a period of relatively muted returns ahead and what should be um should investors temper their expectations now? Look again if we I mean investors memory is very short-term okay they anchor whatever has been the recent past. So for last four five years and people have made so much of money that people’s are still anchored to those returns. So in case people to those people who are anchored around those numbers I think those people need to surely moderate that return from that perspective because over longer term in case GDP has to grow at 10% there’s no way that large companies can give you more than 10 11% return and smaller midcap companies can I mean as an aggregate as an index cannot give you more than 13 14 15% return from that perspective. So it is always good for an investor uh when he’s allocating money into the market to think that maybe early teen is what return he will get from the market uh from a longer term but having said that that is longer term within this longer term there are periods when two year can have no return but then the latter half makes up for no return period so last one year I mean lot of investors have been disappointed because markets have remained flat broadly but I’m sure that these These are periods when market is economy is consolidating, market is consolidating and so maybe this can continue next 3 6 months. You will never know maybe 6 month this can continue further but at some point in time 2 years of no return will be compensated in the third year or uh 2 and 1/2 years at some point. That’s why it is very difficult to time the market. People who think next 3 year, next 5 year will make money. People who think uh whether they’ll make money next 3 months, next 6 months, they will not be able to make meaningful money from that perspective. That’s why this is a longer term game and people who are in in the longer term game will make money in the longer term and people who don’t I mean don’t the sooner people get used to this fact the better it is for them. All right. Well, on that note, let’s wrap up this conversation. Thank you Adita for the insights. Yeah. Thank you so much. Thank you so much. [Music]