This is the reason why midcaps and smallcaps may consolidate in medium-term

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₹35,011 cr and ₹31,195 cr dated 19th March. Furthermore, buying activity has persisted throughout this week, suggesting that institutional investors do not perceive any significant concerns regarding the fallout of domestic momentum. This trend may be linked to the fact that most corrections have targeted Mid & Smallcaps.

Large caps constitute two-thirds of India's total market capitalization, making them the preferred investment choice for long-term institutional investors. MFs are on a buying spree as SIP quantum is at an all-time high. Short-term corrections are the best time to bargain for additional investment.

Further, MFs hold diversified portfolios, as evidenced by data from the top 5 mid & small caps schemes, with fair amount of allocations to large-cap, debt, and cash positions, which can be utilized during hawkish trends. In a departure from the selling observed in January and February, FIIs have transitioned to a buying stance in India during March. The net outflow of ₹22,111 cr in the preceding two months has been offset by a substantial net inflow of ₹37,254 cr as of March 20th.

FIIs are the highest buyers in India in the Asian region, with total of $ 4252.6 million, as of 20th March. The second best is South Korea, with net inflow of $ 1817.1 million. The Federal Reserve's policy announcement on Wednesday is expected to buoy emerging markets, reinforcing the positive sentiment in the Indian market driven by FIIs.

This is in anticipation that the Fed will start to cut the rate from June-July, regardless of whether the CPI remains above the 2% target for some time. Moreover, core economic indicators signal a robust economy, which is conducive to corporate earnings. The Fed is also planning to reduce the pace