Nifty Midcap and Nifty Smallcap indices hit multiple new highs in the last one week. In today's (June 21, 2023) deals as well, both broader market indices hit record high, extending gains for the 8th straight session.
While the Nifty Midcap 100 index advanced 1.1 percent in intra-day deals to hit a new high of 35,741.90; the Nifty Smallcap 100 index rose almost a percent to hit its record high of 10,908.70.
In 8 sessions, since June 12, both Nifty Midcap 100 and Nifty Smallcap 100 index have risen around 4.5 percent. Both these broader market indices have also been giving positive returns for 3 straight months including June.
The midcap index added almost 6 percent in June so far after a 6 percent rise in May as well as April. Meanwhile, the smallcap index has added 7 percent in June so far following a 5 percent gain in May and a 7.5 percent jump in April. These stocks have also outperformed the benchmark indices every month since April, as well as in 2023 YTD and in the last 1 year.
Nifty Midcap and Nifty Smallcap have advanced 9-10 percent each in the last1 month versus a 3.5 percent gain in benchmark Nifty. Meanwhile, in 2023 YTD, mid and smallcap indices have rallied 13 percent and 11 percent respectively versus a 4 percent rise in Nifty. And in the last 1 year, mid and small-cap indices have soared 36 percent and 31 percent, respectively as against a 20 percent jump in Nifty.
Constituents
In the last one month, only 8 stocks in the Nifty Midcap 100 index have been in the red, while the remaining 92 have given positive returns. Similarly, in the Nifty Smallcap 100 index as well, only 11 stocks have given negative returns while 89 are in the green.
Dixon Tech was the top gainer in the midcap space, up 41 percent followed by Tata Comm, Torrent Power, and Patanjali Foods, up between 20-32 percent each. Meanwhile, Prestige Estates, Astral, Linde India, Laurus Labs, Tube Invest India, and Deepak Nitrite also advanced over 15 percent each. Among losers, Clean Science and Tech and Page Industries fell the most, down over 8 percent each.
In the smallcap index, Birla Corp, Jubilant Ingrevia, MCX, and JB Chemicals were the top performers, up over 20 percent each, while MedPlus Health, and Route Mobile added over 15 percent each. However, Anupam Rasayan was the worst performer, down 13.5 percent followed by Campus Activewear, down 10 percent. Aegis Logistics and Polyplex also shed over 5 percent each.
With the broader markets outperforming benchmarks, what should investors do going ahead? Let's see what analysts say:
Deepak Jasani, Head of Retail Research, HDFC Securities
After underperforming in FY23 vis-a-vis Nifty, mid, and small-cap indices and stocks are now playing catch-up. This is also a factor in encouraging Q4 numbers from the broader markets and the higher risk appetite on the part of HNI and MNI investors over the past few months.
Temporarily the focus may keep shifting between large caps on the one hand (coming back in favour in uncertain times) and mid and small caps on the other. The allocation between these needs to be made based on the risk appetite and return expectations of investors.
Anand Dalmia, co-founder and CBO at Fisdom
An investor's personalised asset allocation strategy should ideally carry the appropriate response to this. However, for investors attempting to optimise for risk and reward in the context of the prevailing market cycle, a well-allocated portfolio primarily oriented in favor of large-caps would be preferred. Such allocation would help deliver a more efficient risk-reward payoff in the shorter term. Relative valuations in the small and midcap segments are turning favorable and investors with an appetite could start building allocation through a selective fund or stock selection practices.
Sunil Damania, Chief Investment Officer, MarketsMojo
In early 2023, we predicted that mid and small-caps would outperform large-caps. Mid and small-caps outperformed large-caps in the first five months. However, we anticipate that the mid and small-caps will continue outperforming in the second half of 2023, as well. Hence, investors who can handle increased volatility should increase their allocation to mid and small-caps.
Anil Rego -Founder and CEO of Right Horizons
The SMID segment was discarded last year as domestic investors flocked towards large-caps and foreign investors to high-yielding US assets making it undervalued relative to large-caps available at discounts. We are optimistic about the Small caps and mid-caps segment and expect it to outperform over the next three to four years. Valuation seems reasonably balanced at this point in time, especially on the small-cap side where good businesses were depressed last year due to liquidity outflow and tightening market conditions. Look out for growth companies that can stand to make the most when interest rates will come down as most of the valuation of such companies comes from the terminal value which rerates at a faster pace during declining interest rates environment.
