Dalal Street minnows steal the show in FY24. Provide huge returns to investors
“The recent surge in interest in small and mid-cap stocks among individual investors can be attributed to their notable performance growth and pursuit of high-growth opportunities. As this trend came to the fore, investors showed a clear preference for small and mid-cap stocks. This is higher than that of large caps, as can be seen from the net inflows of equity mutual funds.
“This shift in investor sentiment has been bolstered by India’s healthy macroeconomic conditions, which have traditionally fostered accelerated growth in small and mid-cap stocks during economic expansions, even more so by the impressive quarterly returns reported by many small and mid-cap companies,” CIO of hedge fund Hedonova “It validates the company’s significant growth potential and attracts retail investors looking for a profitable venture,” said Suman Bannerjee.
The broader market delivered impressive performance in the financial year 2023-24. The BSE midcap index hit an all-time high of 40,282.49 on February 8 after falling to a 52-week low of 23,881.79 on March 31, 2023. After hitting record highs, the BSE small cap index jumped to an all-time high of 46,821.39 on February 7. It hit a 52-week low of 26,692.09 on March 31 last year.
The 30-share BSE Sensex hit an all-time high of 74,245.17 on March 7 this year.
Sunil Nyati, Managing Director, Swastika Investmart Ltd, said, “The outperformance of mid-cap and small-cap stocks over the Sensex in the current financial year reflects the dynamic nature of the Indian stock market and the diverse opportunities available to investors.” , said. The BSE small cap index suffered a correction in March, falling 4.55 per cent. The mid-cap index fell slightly this month. Bannerjee said the correction observed in mid-cap and small-cap stocks during March was consistent with the assessment of heightened vitality prevailing in the market.
“This revision reflects the impact of regulatory scrutiny on investment flows into the micro, small and mid-cap sectors. Recent market turmoil, exacerbated by regulatory measures to curb speculation, has resulted in a cautious and discerning approach to investing. We emphasize the need.” He added:
Mid-cap indices track companies with a market value that, on average, is one-fifth that of blue chips, while small-cap companies account for nearly one-tenth of that total.
Nyati said the sharp rise in small and mid-cap stocks in the current financial year was driven by a sharp rise in March.
“After significantly outperforming the larger sector, the sector has seen a correction amid concerns about stretched valuations and market instability,” he said.
According to market analysts, small-cap stocks are generally purchased by domestic investors, while foreign investors focus on blue chip or large companies.
Commenting on the outlook for mid-caps and small-caps in the upcoming financial year, Nyati said, “FY25 promises to be an exciting yet challenging journey for small and mid-caps. A potential re-election of the incumbent government is expected in the upcoming general elections.” This election can create a business-friendly environment and bring stability. This, combined with India’s expected strong GDP growth, will create fertile ground for domestically focused companies.”
He also added that navigating this terrain requires caution.
“Rising interest rates, global headwinds and potential profit-taking could lead to near-term volatility,” Nyati said.
In fiscal 2022-23, BSE Sensex rose by 423.01 points or 0.72 per cent.
However, in 2022-23, the BSE small cap index fell by 1,258.64 points (4.46 per cent) and the mid cap index declined marginally by 42.38 points (0.17 per cent).
