In an interview with ET NOW, Kaustubh Belapurkar, Director Fund Research, Morningstar, said, “I think managers have been rightfully watchful of the midcap space.”ET Now: What is exactly happening in the largecap space? It seems they are clearly in favour right now. What are some of the key largecap stocks that you are watching out for? Kaustubh Belapurkar: There has been a fair bit of activity in the largecap space because money has been coming in from retail investors. You would find that a number of largecap names that are coming up are unusual. For instance, Idea Cellular came up from the communication space purely because there was a QIP and lot of managers subscribed to it. SBI continues to see buying despite the pressure on the prices after PNB scam was unearthed. Then there is Tata Steel coming in on the largecap side, Power Grid, Bharat Petroleum, IT names like TCS and power utility like NTPC. The good part is that last year we saw mostly banks being bought but this year the flavour has changed. You are seeing a number of basic material companies, auto and technology stocks being bought by managers. ET Now: What should be one’s strategy when it comes to midcaps in the current market scenario? Kaustubh Belapurkar: I think managers have been rightfully watchful of the midcap space not just now but over the last one year when clearly valuations did run up ahead of themselves and there was lot of exuberance that was being shown on some of the stock prices. So managers have been extremely selective in picking up these counters. The largecaps remain the largest pie of what managers are buying but yes, select midcaps do see buying. Investors are buying in Triveni Turbines or Voltas as they are seeing value there. I think managers will continue to cherry-pick midcaps as it is not going to be an all in sort of trade. They will be very careful about where they allocate money in the midcap side. ET Now: Besides PSBs, are you seeing large ticket exits for some of the large private corporate banks like ICICI or Axis because there has been a fair amount of price correction there too? Kaustubh Belapurkar: The interesting thing is that there may have been some buying on the PSB counters after the price correction. SBI, BoB have been added a fair bit and even PNB has seen some minor additions. I think the managers need to have that faith that yes the price has corrected, more than we want to get into some of these counters. There has been some profit booking on private banks like Kotak Mahindra, IndusInd and Yes Bank. Financials is not something that has been sold extensively. Yes, some counters have been sold but the likes of HDFC Bank and ICICI Bank, continue to see addition. Axis Bank is another name which saw a fair bit of addition but I think the enthusiasm with which the managers were buying in 2017 has definitely come off because they are already loaded up in positions and they want to look at other counters or rather sectors which are looking better buys at this point of time. ET Now: A correction played out in the metals globally and it rubbed off on us too after Trump announcing those tariff hikes. Are people running for cover when it comes to metals? There is enough proof that the commodity is in an upcycle but are you seeing any capital protection within metals? Kaustubh Belapurkar: Interestingly, we are betting on domestic demand picking up in metals. You can see additions in Tata Steel, Jindal Steel and Power, Hindalco and SAIL. Metals saw a fair bit of buying in the month of February too. ET Now: How are you looking at the overall oil and gas space? What is your sense when it comes to the connection between crude oil prices and some of the largecap upstream and downstream oil and gas companies? Kaustubh Belapurkar: In the oil and gas segment the interest has been limited over the last few quarters. We have not seen any large additions like the ones we saw last year. But clearly companies like BPCL and HPCL continue to see minor adding though nothing exceptional. IOC is one counter where we have actually seen selling in the previous month. I think it is a mixed bag. There is obviously a wait and watch situation and see around what level does oil prices stabilise or if they continue to go up. I think managers will take some time before they take a call to get back more aggressively into these counters. ET Now: What is the kind of churn that you are seeing happening when it comes to largecaps as a whole? Kaustubh Belapurkar: Since laregcaps saw a fantastic run up in January, where clearly a lot of these stocks moved up, managers did not mind taking some profit off the table. Obviously, we have had a correction in February but still a healthy amount of money was made over the last year or two. The focus is now slowly shifting. You can see a lot of buying happening in power utilities, commodities, basic materials and cement. Banks are no longer the darling of the Street from a fund managers’ perspective. That trend has definitely changed. ET Now: What is the outlook on IT, based on the management commentary as well as the way the currency is shaping up? Kaustubh Belapurkar: IT remains a very staggered play. I do not think too many of the midcap names really have got into much buying. The one name that pops up was Cyient that has seen some buying. But beyond that buying was prevelant in the largecap IT space and Infosys particularly was that one counter that saw a lot of activity. TCS has been playing a little bit of catch up now but Wipro still remains a flattish bet for manager. So I think it is going to be a very stock specific play right now. It is not going to be broad based buying from managers as yet.