Time to bet big on mid- and small-cap funds?

Dhirendra, mid- and- small-cap funds are back in the news. Investors are starting to take notice of them. Do we see a revival happening here? Dhirendra: We could be. A variety of things happened in 2019. If you look at the taxation regime, it became concessional for small and mid-sized companies before large-cap companies. And in September, we also got the big announcement that corporate tax rates are down to 22 per cent. This led to companies earning more even if they continue to do just as well, as they were doing before. What happened during the past few years is that we first saw the resurgence of small and mid caps. They grew faster and the market went crazy by giving them higher valuations. People started believing in the sustainability of the growth. However, it could only be true for some companies. It could not be true for all of them. And then, when we saw the cyclicality playing out, most companies fell. There were a lot of companies which were primarily the story and not the reality. So the reality started catching up and we had a lot of dud small caps which fell by the wayside. And now suddenly, everybody is realizing that there is a set of small caps and mid caps which are attractive. They are real. They are credible stories and a

This article was originally published on February 28, 2020.