The BSE's mid-cap and small-cap indices have outperformed their large blue-chip peers so far this year, with several of stocks giving handsome returns of as much as 70% in an otherwise downbeat market.
After witnessing sharp losses last year, the BSE mid-cap and small-cap indices have recorded gains up to 15.12% compared to the benchmark Sensex's less than 5% rise.
Cap is short for market capitalisation (m-cap), a measure by which investors classify a company's size. Large-caps have the highest market value, followed by mid-caps and small-caps.
While the mid-cap index of the BSE has given a return of 15.12%, since the beginning of 2012, the small-cap index has gained 12.85%.
In comparison, the Sensex -- consisting of large-caps -- could only manage to rise by 4.51%, BSE data shows.
Typically, the mid-cap indices track the performance of companies with market value that are a fifth of blue-chip firms (large-caps), while the m-cap of small-cap firms are of almost one-tenth of an average large-cap.
According to Rajesh Jain EVP Retail Research Religare Securities: "Whenever stock markets are in an uptrend, it is observed that small-cap and mid-cap indices do much better than Sensex stocks. In the last one month when there was heavy selling in the market, these smaller stocks have fallen more than large cap stocks."
In May, the Sensex fell by 6.26%, while the mid-cap index lost 6.2% while the small-cap index plummeted by 7.47%.
He further added that, mid-cap and small-cap are higher beta stocks than Sensex scrips.
High-beta stocks are supposed to be riskier but provide a potential for higher returns; low-beta stocks pose less risk but also lower returns.
Large blue-chip stocks are usually held by big investors and they do not worry about small fluctuations.
From the small-caps, shares of scrips like Jubilant Foodworks, Bata India, HDIL, Lanco Infra and Orbit Corp have surged by 70%, 65.55%, 24.69%, 26.73% and 57.74%, respectively.
Most stocks in the mid and small-cap segments were beaten heavily during 2011, as their financial performance was impacted by rising interest rates, analysts said.
The mid-cap and small-cap indices plunged by 34% and 42%, respectively, during 2011. On the contrary, the Sensex slumped about 25% during the same period as investors bet that large-caps could weather the storm better than their smaller peers.
Macroeconomic headwinds on the global and domestic front and concerns over policy reforms influenced the market through out 2011.