Mirae Asset's Varun Goel Discusses Small-Cap Stock Valuations

In a recent interview with Livemint, Varun Goel, Senior Fund Manager at Mirae Asset Investment Managers (India), provided insights into the current state of small-cap stock valuations and the broader Indian market landscape amidst global geopolitical tensions. Goel emphasized that fiscal year 2026 (FY26) is expected to witness a growth rebound for India, driven by significant monetary easing, tax reductions, and robust agricultural production. He noted that while small-cap stocks are inherently volatile with sharp corrections, historical trends indicate that they tend to rebound strongly when macroeconomic and sentiment-related challenges ease. Goel stated, 'We are focusing on small-cap businesses that have robust earnings visibility, prudent balance sheets, and scalable business models.' This approach, he believes, can yield meaningful long-term growth.

Despite the volatility of small-cap stocks, inflows into mutual funds have been substantial, amounting to approximately ₹21,000 crore. Goel highlighted that this trend reflects a maturing investor base increasingly aligned with long-term investment strategies. He noted that disciplined participation through systematic investment plans (SIPs) allows investors to treat market corrections as opportunities rather than setbacks.

Regarding small-cap valuations, Goel pointed out that they are not uniform; while some stocks are trading at elevated levels, others still present attractive entry points. He stressed the importance of a bottom-up investment approach, stating, 'Valuation is justified only when it’s backed by strong fundamentals such as earnings growth, capital efficiency, and a clear path to scalability.'

Goel expressed optimism about several sectors, particularly lending and healthcare, citing the impact of monetary easing on small banks and non-banking financial companies (NBFCs) and a shift towards organized healthcare services. He remains cautious about export-oriented sectors due to ongoing global uncertainties.

In conclusion, Goel advised against holding substantial cash reserves during volatile periods, advocating for a fully invested stance in high-conviction ideas to capitalize on emerging opportunities. He confirmed that the performance of smaller funds can be more agile in the small-cap space, but emphasized that the quality of research and investment processes are ultimately more critical than fund size.

The outlook for small-cap stocks, according to Goel, hinges on the recovery of credit growth and corporate earnings, fostering an environment where investors can potentially reap significant returns over the medium to long term as the Indian economy rebounds.