look news india
The market capitalisation of mid-cap and small-cap companies, in terms of their share in the total market value, reached record levels in May, driven by strong sentiment from domestic investors towards the mid-cap and small-cap segments.
However, mutual fund managers themselves are warning that such a situation is dangerous. According to these managers, the prices of these shares are much higher than they should be. According to a study, the share of midcap and smallcap shares in the country's total market capitalization was 36.3 percent in May. This ratio was 25 percent in December 2020. Whereas in December 2013, this level was at 12.6 percent. At the same time, the share of large cap shares fell to 63.7 percent in May. This ratio was 74.2 percent in December 2020, whereas in December 2013, this level was 80.3 percent.
Market experts said, 'We have seen that the valuation line in this segment has crossed. This has raised concerns about risk with potential returns. We believe that the current risk return trade-off in the small cap and mid cap sector is not attractive. In the last three years, mid-cap and small-cap stocks have outperformed their large-cap counterparts. While the Nifty has gained 26.34 per cent and 15.82 per cent in the last one and three-year period. Nifty Midcap 150 has given a return of 57.46 per cent and 28.05 per cent respectively. Also, Nifty Smallcap 250 has gained 61.72 per cent and 27.33 per cent respectively.