Andrew Holland expects pressure on midcaps and smallcaps to continue in the near term

Andrew Holland, Chief Executive Officer of Avendus Capital Public Markets Alternate Strategies, expects midcap and smallcap stocks to continue to remain under pressure in the near term since their relative value advantage has now diminished.

“The economy will still grow at 6.5-7% because a lot of the heavy capital expenditure which has a multiplier effect on the economy has happened and that will continue to flow through and of course, the government will spend money in these areas. So that is all the market needs, it’s the narrative coming from the government. It might be that it’s lead more by the large-caps initially than midcaps and small-caps but they will come later,” Holland added.

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He believes government expenditure on defence, infrastructure, and renewable energy will continue.

Holland advises investors to let the market settle and consolidate for a few days while the political process of forming the next government unfolds.

It’s best to avoid any aggressive strategies in the interim as the following weeks will provide ample opportunities to re-enter the market as necessary.

Among sectors, he believes the opportunity in electronic manufacturing remains intact. The policies encouraging foreign direct investment (FDI) and supporting local companies will continue to promote growth in this sector.

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