The outperformance by broader markets compared to benchmarks has remained strong since the second half of 2020. It assumes significance, coming as it does after more than two-and-half-years of underperformance, the good run continuing not just in the March quarter, but also in 2021 so far.
Every expert at Dalal Street largely expects the outperformance to continue in the coming period as well, given the expected growth in earnings and economic growth.
During the March quarter, the BSE Mid-cap index gained 12.5 percent and small-cap index rallied 14 percent, outshining BSE Sensex that gained 3.68 percent. In 2021 so far, the gains have been 18.3 percent, 26.2 percent, and 5.1 percent respectively.
In fact, both mid-cap and small-cap indices traded at fresh record highs, much before the benchmark indices Sensex and Nifty50, which are still around 2 percent away from their all-time highs.
Given this expected growth in the broader space, marquee investors - Ashish Dhawan, Rakesh Jhunjhunwala, Ashish Kacholia and Dolly Khanna - have also started increasing their stake in key mid-cap, small-cap, mini small caps, and SME (small and medium enterprise) stocks.
Rahul Singh, CIO-Equities at Tata Mutual Fund, said in a note: "Mid-caps in a growing market with market leadership and low leverage can be an equally attractive investment option as any large-cap. Sector performance has so far been led by large caps, but gradually within sectors, mid-caps and small caps are emerging as top performers."
He added that in sectors with post-COVID tailwinds - i.e., pharma, digitization, e-commerce, and electronic manufacturing - large caps, and mid-caps are adequately represented, and in some cases even dominated by the latter.
In the quarter ended March 2021, philanthropist and private equity investor, Ashish Dhawan, held 16 stocks in his portfolio. Among them, he increased shareholding in a total of four stocks - Arvind Fashions, Glenmark Pharmaceuticals, HSIL and RPSG Ventures, compared to the December 2020 quarter.
The value of total 16 stocks stood at Rs 2,001 crore, the Moneycontrol data showed.
Big bull Rakesh Jhunjhunwala, who held the second biggest portfolio (in terms of value) among individual investors, raised stake in five stocks— Fortis Healthcare, TV18 Broadcast, Jubilant Pharmova, Agro Tech Foods and Multi Commodity Exchange of India.
In total, Jhunjhunwala has shareholding in 37 stocks, whose value stood at Rs 17,721 crore.
Another marquee investor, Ashish Kacholia, held 23 stocks at the end of March quarter with a networth of Rs 1,338 crore. Beta Drugs, Caplin Point Laboratories, HLE Glascoat and IOL Chemicals & Pharmaceuticals are the four stocks where Kacholia raised stake in the March quarter against the December quarter.
Dolly Khanna has also increased shareholding in four stocks - Butterfly Gandhimathi Appliances, KCP, NCL Industries and Talbros Automotive Components - in the January-March 2021 quarter, compared to the October-December 2020 quarter. She held a stake in nine stocks with networth of Rs 238 crore.
This is the right time to invest in equity markets given the expected growth in India, especially after the COVID-19 crisis, and equity is the only asset class that delivers the best returns in the longer term compared to any other asset class, say experts.
"Market is trading at 5-10 percent high compared to historical valuations, yet it may be the right time to invest in equities because of lower interest rates, weaker dollar, normal range of valuation premium amongst emerging markets, and recovery of the economy leading to opportunities to generate above average returns," says Tata Mutual Fund’s Rahul Singh.
Rajesh Cheruvu, CIO at Validus Wealth, lets out some home truths. He told Moneycontrol that history has taught us that 'timing the market' is futile but 'time in the market' is always rewarding, and equity is the only asset class that can consistently earn inflation-beating returns, provided that it is held over a considerable length of time.
So, dumping the portfolio at a loss when markets fall and waiting for an opportune time to re-enter is foolish, he says.
According to Cheruvu, buying-quality-at-the-dips in a staggered manner should be a beneficial portfolio construction strategy at such times.
"Once the COVID situation is brought under control, GDP growth scenarios for India are very bright which would have a solid rub-off on many sectors and market leading companies within those sectors," he predicts.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.