As an investor, what do you do? Do you focus on largecaps or do you now start nibbling into midcaps after the fall?

As an investor, what do you do? Do you sit on cash or have you deployed it already? Do you focus on largecaps or do you now start nibbling into midcaps after the fall?

There are various answers to the same question. If you are a professional investor, things are different. If you are a retail investor looking at the upside in the Indian markets, you just have to sit and wait. But if you are a lot more active, then become a lot more diversified. There is an anchoring around the fact that midcaps have done a lot worse than largecaps. But if you take two years instead of one year, they are exactly the same.

When it comes to segregating by index, the Sensex went up about 30% last year while the midcap index went up about 47% during the same time. Since January, the midcap index has corrected around 17% and the Sensex has gone up about 3%. If I take the minus and the plus together over two years, they are exactly in the same place. So, it depends on where you are anchored. It depends on what is your sentiment is right now.

If you think there has been a large correction, remember it is in line with the general direction of where the market is moving. There is really no significant upside on the average.

There are certain companies which have corrected far beyond what they need to and there are some which have not. So again, the focus comes back to what is it that you are buying. If you are interested in value, there is a lot of value across the spectrum and I would be diversified and look at some value in largecaps. I would look for value across the midcaps and even in smallcaps. I think there has been a lot more correction in certain stocks which did not deserve that but it is really a stock-specific call.

- Tushar Pradhan, CIO, HSBC Mutual Fund. Read the detail insight here - https://goo.gl/f8TWBk