Small- and mid-cap funds score big

Large companies are supposed to perform better than mid- and small- sized companies during difficult times. However, the opposite has been true in the last two to three years. Small- and mid-cap equity funds are racking up significant gains over their large cap peers. A quick look at the category returns reveals that large cap funds have dropped by an average 3.37 per cent in the one-year period. During the same period, mid-cap funds gained 2.31 per cent and small-cap funds gained 4.33 per cent. Over the three-year period, large cap funds have given an average return of 11.56 per cent, while mid-cap funds have delivered an astonishing 25.55 per cent. Small-cap funds as a category have posted average 31.40 per cent returns. These gains hold true even for longer periods such as five years: Large-cap funds have delivered 7.83 per cent, mid-cap funds have given 16.41 per cent and small-cap funds are on top with 18.22 per cent. Why the difference? According to some analysts, mid- and small-cap funds are benefiting to a large extent on account of cherry picking of beaten-down stocks. Beaten-down sectors like banking, real estate, capital goods and auto have outperformed since budget during the market recovery. Jimeet Modi, CEO, SAMCO Securities, says the reason why small and mid caps have outperformed in last one to two years is that they have been able to