Small-, mid-caps erase most losses since mid-March

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₹139.8 a share at the end of the December quarter. The Nifty Midcap index saw its EPS rise a whopping 87% y-o-y to ₹171.8 over the same period. Prabhu expects earnings growth in smids to be in healthy double digits.

A time series of the past six years to FY24 shows that the benchmark small-cap index has corrected four out of six times. It rebounded three out of five times through FY23. “The portfolio rebalancing of domestic investors is mostly in favour of buying, and liquidity in capital markets is improving," said Nirav Karkera, head of research at Fisdom.

“Structurally, the uptrend is intact and intermittent corrections have served as opportunities to buy good stocks at attractive valuations as hinted by the time series." In small-caps, the top 25 stocks have contributed to 37% of the rally by points since mid-March. Some of the rally contributors include BSE (4.68% of the rally), AngelOne (2.31%), KEI Industries (2.03%), Hindustan Copper (1.88%) and Nalco (1.74%). In midcap 150, the top 10 stocks have also contributed 36% of the rally since mid-March.

The top performers include Yes Bank (3.54%), Max Healthcare (3.05%), Indian Hotels (2.94%), Indus Towers (2.93%) and Torrent Pharma (2.78%). The results of stress tests of small- and mid-cap mutual funds initiated by the markets regulator came through on 15 March. Experts said while some numbers appear on the higher side, there is less cause for concern given the liquidity available with the fund houses to meet a potential mass redemption.