MUMBAI: When it comes to stock markets, it’s large-cap indices like Sensex and Nifty that hog the limelight. But over the past month as worries about the US subprime issue resurfaced, the Sensex has managed to offer returns of just 3.4%.
But, BSE mid-cap index has clocked returns of 9.4% and small-cap index surged almost 11%. So is it wise now to invest in smaller stocks?
Since the start of 2007, large stocks have been leading the rally. FIIs have injected a record amount of $17.2 billion into Indian equities and a lot of this money finds its way into frontline blue-chip firms.
“There are a lot of pockets in the large-cap space where it has become very hard to justify price. With FII inflows, a lot of sectors have become expensive and a lot of domestic funds and retail investors have turned attention to the mid-cap and small-cap space,” said Hitesh Agrawal, V-P at Angel Broking.
So how does the retail investor pick a good growth story given that the mid-cap and smallcap universe is much broader than the large-cap space.
“Look at the news being built up in the markets while picking stocks. It’s important to keep in mind that booking profit is important in these companies. However investors can stay invested in sectors with a good growth story for about one-two years,” said Seshadri Bharatan, director at Dawnay Day Securities.
But other analysts say it is difficult for the individual investor to pick winners, and MFs are the way to go.
“The management of lot of these companies is not as transparent as large-cap firms, thus making it hard for investors to make right choice. The retail investor keep in mind that the mid-cap and small-cap space is also riskier,” said R Rajagopal, head, equities, DBS Cholamandalam.
Source : economictimes.indiatimes.com