Small-Cap Small In Size, Big In Gains

With the Nifty touching all-time highs and surprising market participants with tremendous gains in 2020 and 2021 alike, it is the category of small-cap stocks that is actually making a difference in an investor’s portfolio by not only outperforming Nifty in the past one year but by also delivering a broad-based market rally, thus allowing a majority of the investors to book profits. Yogesh Supekar highlights the trend in the smallcap universe while also focusing on the top-quality performers in the small-cap space

- Yogesh Supekar

Frontline indices are trading at all-time highs and if one were to look at the derivatives’ data for the May series, it looks like the rollovers have been strong and there is every indication that the long bets have been rolled over into the June series. The maximum rollover has been observed in Bank Nifty and Nifty which suggests that the markets could make a fresh high in June. There is strong momentum in equity markets no doubt; else it is rare for the markets to ignore comments made by the Reserve Bank of India (RBI) which had warned that the equity markets could be in a bubble zone.

The markets reacted to the RBI’s words of caution by making fresh lifetime highs. In normal circumstances, the markets pay heed to RBI’s comments very carefully and attempt to read between the lines. Meanwhile, the global markets are on a song and what is interesting is that the rally is broad-based which makes a majority of the investors richer, especially those who have shown a desire to make quick money in trending markets. Further, after a long spell of underperformance, small-caps are back with a vengeance as has been seen in their performance over the past 12 months. The table below highlights the outperformance of small-cap indices over the Sensex.

Small-Cap Performance