Small stocks hog limelight in 2023

The record-breaking Systematic Investment Plan (SIP) flows into mid-cap and small-cap funds, indicate a growing appetite among retail investors for these segments

SMIDs In Focus

• Dec 20 was important as major indices hit record highs
• Small-cap index scaled its all-time high of 42,648.86 pts
• Mid-cap gauge reached its record peak of 36,483.16 pts
• BSE benchmark also hit its lifetime high of 71,913.07
• Mid-cap index tracks cos with a market value that is one-fifth of blue chips
• Small-cap firms are almost a tenth of that universe

New Delhi: Smaller stocks have emerged as Dalal Street’s favourites in 2023 that has turned out to be a great year for equities, rewarding investors with big gains, driven by optimism over the country’s macroeconomic fundamentals and heavy retail investors participation. Experts said equity markets are experiencing a prolonged bull run and it is during this time that the mid-cap and small-cap segments tend to outshine their larger counterparts.

Till December 22 this year, the BSE small-cap gauge has jumped 13,074.96 points or 45.20 per cent, while the mid-cap index has surged 10,568.18 points or 41.74 per cent. In comparison, the BSE 30-share benchmark Sensex has rallied 10,266.22 points or 16.87 per cent during this period. The small-cap index scaled its all-time high of 42,648.86 points on December 20 this year and the mid-cap gauge also reached its record peak of 36,483.16 points on the same day. The BSE benchmark also hit its lifetime high of 71,913.07 points on December 20. The mid-cap index tracks companies with a market value that is on an average one-fifth of blue chips, while small-cap firms are almost a tenth of that universe. Analysts attributed better domestic macroeconomic fundamentals and the confidence of retail investors as the major drivers for the exuberance in equity markets this year.

“When the overall economy becomes robust, small and mid-cap segments tend to do well,” Mukesh Kochar, National Head of Wealth at AUM Capital, said. Kochar termed 2023 as a ‘great year’ as far as the equity market is concerned.

“We have seen a new high with broad-based participation,” he said. In all bull runs, there has always have a new set of performers and this time PSU, defense and railways emerged as the greatest performers, he said, adding there have been strong Domestic Institutional Investors (DIIs) and retail money in a market where Foreign Institutional Investors (FIIs) were consistently selling.

“Despite FII selling, markets have created a new history with domestic liquidity. Overall a wonderful year for equity participants,” Kochar added. But experts believe that smaller stocks may undergo corrections in the near term after a hefty rally in 2023. After a turbulent start, the market got its mojo back during the final part of the year. The smallcap and midcap indices hit their 52-week lows on March 28 this year. The BSE smallcap gauge fell to its one-year low of 26,120.32 points on March 28 while the midcap index hit its 52-week low of 23,356.61 points on the same day. The BSE bellwether index hit its one-year low of 57,084.91 points on March 20 this year. Investors battled a slew of negative news from turmoil in large global banks to macroeconomic concerns. Selling by foreign investors in September and the outflow continuing in the succeeding month, elevated US interest rates and conflict in the Middle East played havoc in the markets in the month of October, where the BSE benchmark fell nearly 3 per cent. But markets bounced back in the months of November and December.