Mid-cap and small-cap stocks have long attracted investors due to their high return potential. The Nifty Midcap 100 and the Nifty Smallcap 100 have outperformed the benchmark Nifty 50 in 2024 so far, rallying 28 per cent and 29 per cent, respectively as against an over 13 per cent rise seen in the 50-pack index.
Similarly in the last one year, the mid-cap and small-cap indices have advanced 32 per cent and 35 per cent, respectively while the Nifty has added around 18 per cent.
Just in December so far, both mid and smallcap indices have climbed over 4 per cent each while the benchmark is up 2 per cent. In the previous month, the mid and smallcap ended positive while Nifty was in the red.
Will mid & small-caps shine in 2025?
After a stellar run in 2024, the question remains whether the mid-cap and small-cap rally will sustain into 2025 or if it’s time to turn focus towards the more stable large-cap stocks.
While most experts remain bullish on mid-caps and small-cap stocks, expecting strong interest in this space even in 2025, they are advising caution amid valuations reaching potentially unsustainable levels.
Divam Sharma, Founder and Fund Manager at Green Portfolio PMS, remains highly optimistic about the small and mid-cap space. Sharma believes that investor enthusiasm will continue into 2025. He is particularly bullish on the small and mid-cap sectors, anticipating that they will outperform large-cap stocks in the coming year.
While the market may remain unpromising in the short term, there is potential for positive momentum after mid-January 2025, opined Dr. Ravi Singh, Senior Vice President of Retail Research at Religare Broking, suggesting that that’s when the broader market space will start to meaningfully outperform the benchmarks.
“Mid-cap and small-cap stocks could start to outperform benchmark indices post-mid-January. The outperformance may not materialise before then,” he said.
From a longer-term perspective as well, Sushant Bhansali, CEO of Ambit Asset Management, sees potential in mid-caps and small-caps.
Bhansali points out that over the next three years, these stocks remain attractive for accumulation, given the strong economic tailwinds that continue to benefit many businesses in this space. He emphasises that mid-caps and small-caps have become more capital-efficient and have lower leverage compared to the past decade, which could lead to greater stability and growth in the future.
In summary, the outlook for mid-cap and small-cap stocks in 2025 appears positive, but it comes with a degree of caution. While short-term performance may be volatile, experts believe that mid-caps and small-caps will continue to perform well in the long run.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
