Analysts advise caution as small and midcap stocks sparkle

High networth investor (HNI) and retail inflows into midcap and small cap stocks have helped these constituents steal the thunder from large-caps in the latest market rally from March to date.

- Ram Sahgal

The Nifty Smallcap 100 index has surged 40.53% while the Nifty Midcap 100 has risen 35% from 20 March through 5 September. In the same per-iod, the Nifty has delivered a relatively modest 15%, prom-pting market veterans like Deven Choksey and Shankar Sharma to sound a note of caution to retail investors amid the stellar rally in smallcaps.

While HNIs have a penchant for investing in small and midcaps, domestic mutual funds have also pumped money into small cap and mid cap schemes at the cost of large caps, apart from investments by direct retail. For example, mutual funds have net invested a total of ₹15,108 crore in small cap fund schemes and ₹6,358 crore in midcap schemes over April-July. Large cap schemes have seen a net outflow of ₹5,239 crore in the same period.