HDFC MF’s Prashant Jain expects mid-, small-caps to catch up with large cap rally soon

Midcap and smallcap stocks should be able to bridge the gap caused by the outperformance of large-cap stocks in due course of time, believes Prashant Jain, Executive Director and Chief Investment Officer, HDFC Mutual Fund.

“Small and midcaps have done very poorly barring very few individual stocks and most of the fund managers have mid-caps in their benchmark which has hurt the performance. Over the long term, the performance of small, midcap vis-a-vis large-caps typically converges. So, the headwind of small, midcap underperforming should go away in due course of time,” Jain said.

In the last three years starting January 1, 2016, while BSE Sensex surged nearly 50 percent, BSE Midcap rose 33 percent and BSE Small-Cap went up by merely 13 percent.

He was speaking on a panel discussion held at the launch of Axis Bank’s Burgundy Private, its private banking platform which caters to high and ultra-high net worth-segments of customers.

Jain said the current times are not representative of the future and what was happening five years back is also not representative of the future.

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He also advised that investors must segregate their risk in two portions – safe capital and risk capital and to reap the benefits of equities one must stay put for 5-10 years.

“Under risk capital, allocate to equities and if markets become undervalued one should be able to clearly beat the benchmark. In a growing economy like India, the index itself has become 400 times so the smartest investors stayed put and benefitted,” he said.