Small and mid cap indices beat frontline indices, lead market rally in FY24

FY24 was clearly the year of the small & midcaps. Small and mid cap indices saw massive gains giving returns double than that of the Nifty in FY24. The combined market capitalisation of BSE Smallcap index of 1,000 stocks has grown by Rs 26 lakh crore to Rs 66 lakh crore now in the financial year. A whopping 252 stocks or every fourth stock in the smallcap index has given multibagger returns.

Investment return in FY24

Meanwhile, Moneycontrol quoted equity analysts and said that the investment into small and mid caps may come down in FY25, as large-cap stocks may reclaim momentum. This is because, Sebi's concerns of 'frothy' valuations and mutual funds' stress test results cast a shadow on small-cap stocks.

Also Read: SEBI Chief raises concerns over excessive valuations in small and mid-cap stocks

FY24 has been a stellar year for equity markets with Nifty climbing over 27% to 22,500 from 16,900 and Sensex surging over 23%. The surge was due to the accommodative monetary policy, strong domestic retail participation, corporate earnings, and economic recovery post pandemic blues.

Road ahead in FY25

The Moneycontrol report further quoted market experts who are expecting a bull trend in large cap stocks to remain intact going ahead even as some uncertainty owing to 2024 general elections may worry investors.

Ajit Mishra, Senior Vice-President of Technical Research at Religare Broking told the publication that he is expecting Nifty to surge up to 25,500 in financial year 2024-25 (FY25) supported by heavyweight stocks. However, on the downside, he underlined a strong support of 19,500-20,000 for Nifty.

Broader Market performance

The Broader end market including Nifty Smallcap 100 and Nifty Midcap 100 have also outperformed benchmarks by rising 69% and 59% respectively in FY24.

"Smallcaps, especially, are likely to receive a backlash in FY25 as Sebi may ramp up scrutiny over this segment due to stretched valuations. We expect smallcaps and smaller midcaps to see moderation in gains going ahead," VK Vijayakumar, Chief Investment Strategist of Geojit Financial Services told Business Standard.