Mid, smallcaps reach for the sky despite analysts sounding caution

In July, the S&P BSE Smallcap index surged 7.4 per cent as compared to 5.7 per cent rally in the Midcap index, and a modest 2.8 per cent gain in the Sensex.

Stocks of mid-and small-cap companies continued to gain ground in July despite analysts sounding caution on these two market segments given the sharp run thus far in calendar year 2023 (CY23).

Sanjeev Prasad, co-head, Kotak Institutional Equities (KIE), in a note co-authored with Anindya Bhowmik and Sunita Baldawa in June-end, for instance, had cautioned against the sharp run in the mid-and smallcaps.

“We do not see any particular reason for the excitement in mid- and small-cap stocks. We can perhaps understand the rerating seen in certain sectors, such as BFSI (smaller private banks), health care services (hospitals), and real estate,