Midcaps, smallcaps strongly outperform Sensex in 2024 despite valuation concerns; what is driving broader market?
demat accounts from around 4crores in early 2020 to above 15 crores now have created a new breed of newbies who are chasing the mid and smallcaps," said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.Also Read: Foreign investment surge fuels spectacular rally in India’s smallcaps amid bubble alerts"The sustained flow of mutual fund investments, particularly SIPs, into the broader market gives no option to the fund managers but to buy mid and smallcaps even when the valuations are high. The current pattern of fund flows and retail investor behaviour may sustain the outperformance of this segment for some more time.
But investors should be vigilant. Undoubtedly, safety is in largecaps," said Vijayakumar.Also Read: Equity mutual fund inflows skyrocket to record ₹34,697 crore in May, SIPs reach ₹20,904 crore: AMFIAnother important factor behind the outperformance of midcaps and smallcaps is robust corporate earnings growth.Mythili Balakrishnan, Co-Fund Manager at Alchemy Capital Management, believes the underlying earnings of midcap and smallcap indices may grow at a compound annual growth rate (CAGR) exceeding 20 per cent over the fiscal year 2024 to 2026, surpassing the mid-teens growth seen in the Nifty 50.
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