'Short-term risk in mid-caps is higher than normal'

FUND MONITOR: Sivasubramanian K N, senior portfolio manager (equity)

Considering the number of mid-cap companies, it is difficult to assess the sustainability of the rally in mid caps. But investors need to be aware of the volatility.

There are a few companies across sectors with good fundamentals that have long-term potential, but the rally has also seen not-so-good companies benefiting from investors' interest in the segment.

The investible universe will only increase as the benefits of robust growth percolate across the economy. The key would be to increase the breadth of coverage.

Given the rise in stock prices over the last year or so, the short-term risk in this segment may be higher than normal.

What is your investment strategy? How do you protect yourself against the higher risk in the mid-cap segment?

Given the liquidity/risk considerations of the mid- and small-cap segments, we take a smaller exposure over a larger number of companies. We identify a few larger companies in the mid-cap space which have better liquidity.

We take a larger exposure to such stocks, and the balance assets are spread across 30 to 35 smaller companies. We book profits as soon as our target prices are met.

What is your view on equity markets in general?

While we continue to be positive about the long-term prospects of the domestic markets, the dampeners could be the high oil prices, the impact of new government spending programmes on public finances and rising US rates on global liquidity.