The Nifty Midcap 100 index moved past the psychologically crucial 40,000 mark for the first time on Tuesday and hit a high of 40257.90. The Nifty Smallcap 100 index tested a lifetime high of 12701.05.
Nifty Smallcap 100 has risen for the third straight session, while Nifty Midcap 100 has extended its winning streak to the 7th straight day.
While the Nifty 50 snapped its 5-month winning streak in August, both the midcap and smallcap indices are up for the 6th consecutive month.
In the 5 months to July, Nifty 50 gained 14%, whereas the Nifty Midcap 100 has surged
34% and the smallcap 100 a whopping 41% since April.
One of the major factors driving the outperformance of the broader market is better-than-expected earnings growth, according to analysts. “If you’re an investor looking for growth and opportunity in the Indian stock market, it might be worth considering midcap and smallcap stocks,” said Achin Goel, VP – Wealth Management and Institutional, Bonanza Portfolio.
Some experts also believe that new emerging trends are visible more among midcap and smallcap companies and they provide opportunities for alpha generation.
“The mid and smallcap space provides ample opportunities to invest in businesses having great growth prospects, product differentiation, imprand oving business economics. We strongly believe that the mid and smallcap segment will drive consistent alpha generation,” said
Nitin Agrawal, CEO, Torus Oro Portfolio Management.
Will the bull run sustain?
Eventhough the broader market provides ample investment opportunities, a word of caution is always sounded out by money managers, given the inherent volatility in this segment when compared to bluechip stocks.
After such a strong run, some money managers do believe that risk-reward has turned neutral and that one needs to be selective while betting money in this market cap segment.
“Our analysis indicates that markets are in the ‘Fair Zone’ of valuations, which means there is a balanced risk-reward for investors. Currently, we are neutral in allocation over market capitalisation, as we believe there is a balanced risk-reward in large, mid and smallcaps,” said Sanjay Bembalkar, co-head of equity, Union MF.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)