Mid & smallcaps outperform large caps for first time
Mid- & Smallcaps Outperform
Large Caps for First Time
Indian midcap and smallcap stocks have outperformed large caps since
January this year highlighting the topsy-turvy nature of the market which is
experiencing its first major correction in nearly two years.
Traditionally, large caps tend to outshine smalland midcaps during market
downturns as investors believe that big companies are better placed to
weather any storm. This has been the case in the last few corrections most
notably the one that preceded the onset of the bull market in September
2013. In January-August 2013, the Sensex fell 10.36% as the rupee tumbled
amidst an emerging market selloff. But midcaps and smallcaps fell 26.36%
and 30.35%, respectively . Between November 2010 and December 2011,
when markets were roiled by the Greek crisis and the US downgrade, large
caps escape lightly, falling 27.37%, while midcaps tanked 33.86% and
smallcaps fell 43.04%.
This time however things are very different. For the first time in Indian markets,
large caps have been laggards in this correction while midcap and smallcap stocks
have been resilient. Since January 29, the Sensex has fallen 13.36%, dragged down
by poor earnings in commodity , capital goods and public sector banks and the
Chinese and Greek crises. Midcaps have eked out a 0.35% gain, while smallcaps
have fallen only 4.57%.
One reason could be the amount of money being raised by mid-cap mutual funds.
More money is coming into mid-cap and small-cap funds than the large-cap ones
and this is forcing mutual funds to stock up on smaller stocks.“Things are different
this time as lot of mutual funds money has gone into quality midcaps in the last
one year,“ said A Balasubramanian, chief investment officer, Birla Sun Life AMC.
“The mid-cap companies with a vision, good management, sound business module
and sustainability in a highly competitive environment will do well in the near term
and eventually become large caps,“ he added.
Secondly , medium and smaller companies have also been reporting better results
than some of their large cap counterparts and this in turn is making institutional
investors evaluate their potential in a new light.
Though some mid-cap stocks are trading at high valuations, the gap between large
caps and midcaps has not widened significantly . The CNX Midcap index is now
trading at a oneyear forward price to earnings multiple of 17.09 times versus the
Nifty's one-year forward PE of 16.06. The five-year average PE of Nifty and CNX
Midcap index was 15.18 and 14.48, respectively .
With a potential turn in the economic cycle and more investors shifting their
portfolios to mid-sized companies, some of these may well emerge as
outperformers, said fund managers. “In the first phase of the current bull run, most
of the large caps became overpriced and focus shifted on midand small-cap stocks
with risk on trade gaining momentum, “ said Dhiraj Sachdev, senior VP and fund
manager, HSBC Global Asset Management.
For details and bookings contact:-
Parveen Kumar Chadha… THINK TANK
(Founder and C.E.O of Saxbee Consultants & Other-Mother
Mobile No. +91-9818308353
Address:-First Floor G-20(A), Kirti Nagar, New Delhi India Postal Code-110015