Smallcap, midcap stocks outrun Nifty for 6 straight months. Time for bluechip revenge?
midcap stocks have managed to outbeat Nifty for all the six months of FY23. Nifty Midcap 150 and Nifty Smallcap 250 indices have not only fared better than Nifty in each of the last 6 months but have also given positive returns all throughout.
In March 2023, when Nifty started to recover, the mid and smallcap indices were still under selling pressure.
But in April, when the headline index gained 4%, the midcap index advanced over 5% while smallcaps gained 7%.
June turned out to be the best month for the midcap index as it leaped over 6% while July was the best for smallcap when it advanced nearly 8%.
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Backed strongly by Dalal Street's growing army of retail investors, the rally in the broader market despite some hiccups in the frontline index is backed by a strong corporate earnings outlook and years of underperformance.
As far as valuations are concerned, PE multiples are not anywhere closer to their historical high in both mid and smallcaps, shows data from ASK Private Wealth.
«There is no compelling reason now to sell SMID (small and mid-cap) portfolios as the latter have better growth prospects and similar valuations to largecap companies. However, investors should be aware of the risks and mitigate them by diversifying their SMID portfolios,» the wealth management firm said, adding that from an earnings-valuation perspective, post-Covid index expansion is still lagging earnings for SMID compared to largecaps.
Analysts see pockets of froth in smaller stocks but not near the exuberance phase seen in 2018 or 2021.
«Smart money is still looking at mid and smallcap space especially among the domestic institutional investors.
This space is looking decent despite near-term strong returns. Intermediate price
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