Small-cap and mid-cap funds have enormous returns, but also come with risks Analysts say investors are fascinated by small-cap and mid-cap companies due to India’s rapid growth, funding opportunities, and government support.
“The grounds for this interest lie in the fact that India is growing at its fastest pace to date. Not only the investors, but the common man is also showing great interest in the growth of the country. This growth is eventually empowering small and mid-cap companies. The funding and immense opportunities from the government are catalyzing the growth of small and mid-cap companies,” said Arun Singh Tanwar, Founder and CEO, of Get Together Finance (GTF).
With good trust, surplus funding, and strong financials, small and midcap companies are worth betting on in the stock market, suggested Arun Singh Tanwar.
Interest in mid and small-cap stocks reflects India’s strong corporate earnings. Despite uncertain macroeconomic conditions, a selective investment strategy in areas of strong earnings resilience is recommended for medium-term investors.
“We think that the growing interest among investors in mid and small-cap stocks reflects the broad-based strength of India’s corporate earnings in recent years. Looking ahead, although short-term macroeconomic conditions may be uncertain due to factors like upcoming national elections and global yield-related volatility, we believe that adopting a selective investment strategy in mid and small-cap stocks, with a focus on areas of strong earnings resilience, is the prudent approach for medium-term investors,” said Trideep Bhattacharya, CIO-Equities, Edelweiss MF.
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India is one of the fastest-growing economies. Investors believe that small-cap, mid-cap, and thematic funds are a good bet for the future due to the growing investor base, increasing market share and revenue, and potential for capacity expansion in small companies.
“In terms of market share and revenue, mid and small-cap space have a low base and are growing at a faster rate than large-cap companies which have a high base. Government and private cap ex-are picking space and small companies have the potential to increase the capacity by 2x or 3x at a much faster pace than any larger company because they have a very large base. To summarize, the investor base of these undertakings is growing in line with capacity expansion and a low shareholder base favoring them,” said Mukesh Kochar, National Head of Wealth at AUM Capital.
Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 03 Nov 2023, 01:36 PM IST