Contrarian view: 4 reasons why Anand Rathi expects mid and smallcaps to outperform in the upcoming year
Read here: Bull run ends here! Phillip Capital sees Nifty 50 falling 15% to 18,550 Amid widespread concerns over froth formation in the Indian equity market, the brokerage stands out with a contrarian perspective. While many voices express apprehension, the brokerage contends that the Nifty 50 and Nifty Largecap 100 are presently fairly valued. In contrast, it sees substantial upside potential in the Nifty Smallcap 250 index.
“Even if we tone down consensus earnings expectations and take valuation multiples lower than ‘normal’ in this phase of the business cycle, we observe no valuation froth," it said in a recent note. Read here: Smallcap, Midcap index: 4 reasons why J.P. Morgan sees 5-10% more downside risk Despite a recent short-term correction, domestic brokerage house Anand Rathi expects small and midcap stocks to outperform largecaps over the upcoming year.
It has cited four compelling reasons for the same: Historical precedence: The historical trend of mid and smallcaps outperforming largecaps, notably observed from 2014 to 2017, provides a strong foundation for this expectation. This historical pattern suggests a propensity for smaller companies to exhibit greater growth potential compared to their larger counterparts. Rebounding from lows: The significant gains witnessed in the past 12 months can be attributed to a rebound from substantial underperformance endured in 2018-19, and again in 2022.
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