Smallcap Rally News Today

Over the past year the MSCI Emerging Markets Small Cap index has gained 16.5%, beating the large cap index’s return of around 9%.

Ownership of smallcap stocks by institutions such as mutual funds has risen drastically, which makes the current rally much more stable compared to earlier ones, says B Gopkumar, MD and CEO, Axis Mutual Fund

“It is not right for us to conclude that midcap and smallcaps are in a bubble. Yes, they have done well and the most interesting part is if you look at the corporate results for last quarter, companies have performed well and that is probably leading the rally in midcaps and smallcaps.”

"Promising business outlook, near-monopoly status, and the governments Make-in-India drive first pushed railway stocks, followed by defence, and now mining. Hugh cash on books, dirt cheap valuations etc. were an added advantage for the rally."

“I am really looking for further triggers for the stock market to move up from these levels. Intuitively, you do feel that there should be a correction, it could be healthy, shake out a lot of the weak players and provide an opportunity to get into good quality businesses at reasonable valuations, with margin of safety.”

"So long as the company continues to deliver on the quarterly front and the fundamentals have not changed, the underlying growth momentum has not changed, it is best to remain invested. I can tell from decades of experience, that you get multibagger returns by just staying put for three years, four years, five years and not trying to do this entry exit kind of a strategy. "

Having said that, the reason why we feel that we are pretty confident in pent-up demand, because of the asset quality being much better than what we really expected and possibly also the fact that whatever had happened during the pandemic, I think that is all over now. We made all write-offs and provisions and we have nothing more to practically look at in terms of stability and once all these factors start kicking in, our cost-to-income ratios, as well as ROAs, everything will have a positive i...

“When decadal trends start changing, it does not end in a year. It actually gets elongated. The whole PSU basket is not just banks, it is also defence stocks, infra-type plays. So, going with the trend, being humble, accepting what the market is telling you, is what I have learnt.”

Shankar Shankar said while being a bull he has always cautioned that one can lose money a lot easily in smallcaps than largecaps.

"Given relatively cheaper valuations, go for consumer durable stocks . Also, in the textile space, we have seen a lot of value destruction with falling cotton prices. Now there is a lot of improvement in spreads and and we should be getting good traction going forward. In various sectors like auto ancillary, engineering etc, companies affected by specific events are bouncing back and we should look at those kinds of stock specific sectors."