Smid dilemma: Experts advise caution

Experts say that if earnings continue to underwhelm, small and mid-cap stocks could potentially see a deeper correction

- Dipti Sharma

When US President Donald Trump spooked the markets with his tariff threat earlier this year, small- and mid-caps landed in bear territory, with the Nifty Smallcap 250 and the Nifty Midcap 100 correcting 25% and 21%, respectively, from their September peak by February end.

Now, markets have staged a comeback, so has the Smids vs bluechip dilemma.

Chasing high returns often requires investing in small- and mid-cap stocks for their explosive growth potential—a high-risk, high-reward strategy.

However, according to market experts, it could be in the best interest of retail investors to curb their enthusiasm because if earnings continue to underwhelm, Smids could see a deeper correction.

The March quarter earnings have largely disappointed, with most companies in the BSE 400 failing to deliver meaningful growth, said Saurabh Mukherjea, founder and chief investment officer (CIO) at Marcellus Investment Managers, adding that valuations are once again creeping into expensive territory.