Will 2025 bring a breather to mid-cap, small-cap stocks? Experts share their views

After a stellar run, mid-cap and small-cap stocks, once hailed for their high returns, are showing signs of slowing down as 2025 begins. Both the Nifty Midcap and Smallcap indices have dropped more than 2% in the first week of January, while the Nifty 50 only saw a modest decline of 0.2%.

Despite a challenging start, mid and small-caps had an impressive 2024, outperforming the Nifty 50 with gains of over 25% for both indices. This followed remarkable performances in 2023, where they rose by 32% and 35%, respectively. However, experts caution that this strong momentum may face hurdles in 2025.

Key Concerns for Mid and Small-Caps in 2025:

Regulatory Scrutiny: Increasing regulation may affect these segments.

Slower Earnings Growth: Growth rates could ease, limiting outperformance.

Monetary Policy Tightening: Policies that restrict liquidity might impact growth.

Experts like Trivesh D, COO at Tradejini, and Dr. Ravi Singh, SVP at Religare Broking, urge caution. They suggest focusing on high-quality stocks with strong fundamentals, as the broader market may face volatility in the first half of the year.

Looking Ahead:

Neeraj Chadawar from Axis Securities predicts volatility for the first half of 2025, with the possibility of stronger returns later in the year. Consolidation seems likely in the short term, so identifying companies with resilient business models will be key to navigating the coming months.

While mid and small-cap stocks have been high performers in recent years, the road ahead in 2025 may require a more selective investment approach.

Disclaimer: The views shared are based on individual analysts’ perspectives and may not reflect broader market trends. Always consult certified experts before making any investment decisions.