Smaller stocks have continued to provide higher returns to equity investors so far this year, significantly outperforming their larger peers on the indexes. The BSE Small Cap Index has risen by 7,333.47 points or 35.51%, while the Mid Cap Index has jumped 5,096.41 points or 25.25% so far this year. exercise.
By comparison, the 30-stock BSE Sensex benchmark gained 9,797.78 points or 19.78%. “We are in a structural bull market where small and mid cap stocks tend to outperform and we are seeing the same phenomenon happening. The other reason for the outperformance of the broader market is the high participation of retail investors and thanks to technology that helps stock market penetration in India, “said Parth Nyati, founder of Tradingo.” If we look at the first half of FY’22, we see continued sales by FIIs, which is another reason large cap stocks underperformance, but the overall performance of Indian stock markets is much better than that of their global peers, “he said. It is noted. The BSE midcap index has hit its peak. All-time high of 27,246.34 on October 19 and smallcap hit its all-time high of 30,416.82 on the same day BSE Sensex hit its all-time high of 62,245.43 on October 19.
Nyati said a massive outperformance of the Indian market in FY22 has been seen so far thanks to a strong recovery in the economy and demand, supportive government policies and, most importantly, strong inflows. retail through direct stocks and mutual funds. “We are in a strong uptrend and the Indian market will continue to outperform, but the market has exceeded expectations in recent months,” he said.
Domestic stock markets recently experienced a record rally, reaching many new lifetime highs. Analysts said the stock market recovery was due to many factors, including global liquidity, the containment of COVID-19 cases and a significant resumption of vaccination.
The BSE benchmark has had a tremendous run so far this fiscal year, rising from 53,000 to over 62,000 during this period. Regarding the recent correction in the equity market, Nyati added that we are seeing a first significant correction after a long time and that the liquidation can be attributed to the relentless selling of the FIIs. Regarding the outlook for small and mid caps, he added that we are seeing the first significant correction and that could see a further extension to 10-15 percent when it will be a good buying opportunity. “It will be interesting to see the behavior of new investors who have debuted in the equity market in the last year and a half because they have yet to see a significant correction. We could see more volatility in midcap and smallcap indices over the next 1 -2 months which could eliminate weak hands as this correction will be a good buying opportunity to enter quality names as we will see a strong rebound again where Sensex could exceed the 65,000 mark by the end of FY22, “he added.
In the last fiscal year, the BSE small-cap index rose 11,040.41 points or 114.89 percent, while mid-caps jumped 9,611.38 points or 90.93 percent. In comparison, the BSE benchmark registered 20,040.66 points, a gain of 68 percent over the previous year.
Small stocks are typically bought by local investors, while foreign investors focus on bluechips or large companies, according to market analysts. The midcap index tracks companies whose market value is, on average, one-fifth of bluechips or large companies.
Small-cap companies make up almost a tenth of that.