V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlights a significant trend dominating the market this year: the remarkable outperformance of mid and small-cap stocks. Despite the Nifty's modest 8.82% year-to-date (YTD) increase, the Nifty midcap index and Nifty Smallcap index have surged by 33.38% and 41.66% YTD, respectively.
He underscores that the Nifty's performance is influenced by the underwhelming performance of banks, which carry substantial weightage within the index. The Nifty Bank index has remained nearly flat this year, demonstrating minimal growth at 0.87%.
Vijayakumar attributes banks' underperformance, despite positive results, to being excessively owned and the sustained selling by Foreign Institutional Investors (FIIs) putting pressure on bank stocks. Conversely, mid and small-cap stocks, being relatively under-owned, are experiencing buoyancy driven by retail enthusiasm. He mentions that while the broader market lacks valuation comfort, large-cap stocks maintain fair valuations.
Anticipating the next phase of the rally to be driven by institutional funds, both foreign and domestic, Vijayakumar suggests that this momentum will likely favor large-cap stocks.
Regarding Friday's market activity, the BSE Sensex remained relatively steady, up 7 points at 66,027. JSW Steel saw a 1% increase, while IT stocks such as HCL Tech, Wipro, and Tata Motors faced declines of 1%.
(With Agency Inputs)
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