Investors had a love-hate relationship with the market in the year gone by. For small caps, it was more of a hate-hate. The S&P BSE 250 SmallCap index fell twice as much as Sensex in the first half of 2022, which is quite a common sight in declining market phases. But even when the market tides turned later, its participation was not that strong. The index delivered just -1 per cent returns last year, leaving small-cap investors in low spirits. And we feel you. The meme pretty much explains the emotions of small-cap investors right now. However, there's a lot to cheer about if you look at their three-year performance. Even if you take this year's weak returns into account, small-caps have still delivered an impressive 26 per cent per annum since 2020. That's 11 per cent higher than the Sensex! The mid-caps have been in fine form too, gunning out 24 per cent annualised returns in the last three years. That said, even the three-year performance should not be that important. The investment case for mid- and small-cap lies in enjoying the alpha generated over years of patience and resilience. So, just hang in there! Investors in 'high josh' While it's normal for people to be ecstatic about investing in good times, we usually find investors in a bit of a frenzy when markets are shaken. But this year was different. Despite small-caps tumbling by as much
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