Mid-Cap Stocks Face High Risk: Focus on Strong Fundamentals, Earnings Visibility

• Mid-cap stocks show high valuations, approximately one standard deviation above their long-term average, indicating limited safety margin.
• Rohit Sarin, Co-founder of Client Associates, advises investors to be selective and prioritize companies with strong fundamentals and sustainable earnings visibility.
• Earnings decline has likely bottomed out, but recovery will be gradual and uneven across sectors, improving over the next 3-4 quarters.
• US trade deal's impact on India is more psychological, boosting market sentiment and investor confidence rather than directly affecting GDP.
• Government's fiscal policy is shifting towards consumption-led demand revival through targeted support and incentives, following a maturing capex cycle.

Why It Matters: Investors should be cautious with overvalued mid-cap stocks and focus on strong fundamentals and earnings visibility.