BS EDIT: Why smallcaps are defying the market downturn

Small caps thrive amid market decline

Recent stock market correction saw FPIs selling, while domestic investors stayed bullish; small caps outperformed large caps defensively

Twist in market correction

Small caps rose 38% vs Nifty's 26% till September, during the correction, Nifty fell 6% while small caps dropped only 2.5%, showing rare resilience

Small caps outperform large caps

FPIs avoid small caps, which saw faster growth in Q2FY25, driven by sectors like green energy, defence, and health care dominated by small firm

What's driving this trend?

Small cap growth is driven by under- represented sectors like electronics manufacturing, drug manufacturing, smart meters, and data centres

The rise of sunrise sectors

Small caps trade at high valuations: Nifty Small cap 100 PE 24 vs 10-year average 16-17; Nifty Midcap 100 PE 32 vs average 17. Growth exists, but caution advised

The valuation dilemma

Small caps hold multi bagger potential but come with high risks. Elevated valuations and slowdown signs call for due diligence and cautious investment

Investor caution is key

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