Negative Return, Positive Investors

2022 was not a pleasant year for mid-cap and small-cap investors.But investors don't seem to have lost faith in this segment as yet. That's good.

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Investors had a love-hate I relationship with the market in the year gone by. For small caps, it was more of a hate-hate. The S&P BSE 250 SmallCap index fell twice as much as the Sensex in the first half of 2022, which is quite a common sight in declining market phases. But even when the market tides turned later, its participation was not that strong. The index delivered just -1 per cent returns last year, leaving small-cap investors in low spirits.

And we feel you. However, there's a lot to cheer about if you look at their three-year performance. Even if you take this year's weak returns into account, small caps have still delivered an impressive 26 per cent per annum since 2020. That's 11 per cent higher than the Sensex! Mid caps have been in fine form too, gunning out 24 per cent annualised returns in the last three years.

That said, even the three-year performance should not be that important. The investment case for mid and small caps lies in enjoying the alpha generated over years of patience and resilience. So, just hang in there!