• by Arya Sharma
• 14th Dec 2020

Small Stocks May Hold the Year 2021 in India, Large Stocks Left Behind

For 3 years, the large stocks are beating down the smaller stocks, however, it’s for the first time that small stocks are ahead in the market. The statistics say that small stocks may hold the upcoming year as well. A growth of 20% is seen in the Nifty Midcap 100 Index and around a 17% increase in the Nifty Smallcap 100 Index. Whereas, there has been only an 11% spike in the case of the Largecap NSE Nifty 50 Index.

Vinod Karki, India’s highly renowned broker and head of the strategy at ICICI Securities Ltd., said that “Such turn in performance does not fizzle out so fast, especially when the valuation gap is still there,”. “High liquidity and prospects of economic recovery are perfect recipes for relatively riskier assets such as smaller-sized companies.”

The small and mid-cap were successful in exceeding the large-cap stocks because of the corporate earnings, surge in the retail sector as well as with the strong support of the central bank and government to boost the economy.

COVID-19 has also played a prominent role in the outperforming of small stocks, as the havoc created doubts and confusion for the investors and choices to be made in an unstable economic crisis. This resulted in investors playing a safe game and investing in small stocks in case of any discrepancies in the economy.

Although India’s gross domestic product has reduced by 7.5% in last 3 months till September, India can still control by including some more banks. Even a 23-24% contradiction is been recorded from the 2nd quarter of the year.

Head of equities for Dolat Capital Market Pvt Ltd., Amit Khurana stated that “We believe that the lead current indicators on earnings and sentiment are supportive of a significantly new high over the next 18 to 24 months for the mid-cap and small-cap indexes,” Dolat Capital Market Pvt Ltd. He further added, “Going forward, economic recovery, expectations of sustained customer demand and liquidity will drive gains.”