Most small, mid-cap stocks beat blue-chips so far this year

The BSE's mid-cap and small-cap indices have outperformed their large blue-chip peers so far this year, with several of stocks giving handsome returns of as much as 70 per cent in an otherwise downbeat market.

After witnessing sharp losses last year, the BSE mid-cap and small-cap indices have recorded gains up to 15.12 per cent compared to the benchmark Sensex's less than 5 per cent rise.

Cap is short for market capitalisation (m-cap), a measure by which investors classify a company's size. Large-caps have the highest market value, followed by mid-caps and small-caps.

While the mid-cap index of the BSE has given a return of 15.12 per cent, since the beginning of 2012, the small-cap index has gained 12.85 per cent.

In comparison, the Sensex - consisting of large-caps - could only manage to rise by 4.51 per cent, BSE data shows.

Typically, the mid-cap indices track the performance of companies with market value that are a fifth of blue-chip firms (large-caps), while the m-cap of small-cap firms are of almost one-tenth of an average large-cap.

According to Rajesh Jain EVP Retail Research Religare Securities: "Whenever stock markets are in an uptrend, it is observed that small-cap and mid-cap indices do much better than Sensex stocks. In the last one month when there was heavy selling in the market, these smaller stocks have fallen more than large cap stocks."

In May, the Sensex fell by 6.26 per cent, while the mid-cap index lost 6.2 per cent while the small-cap index plummeted by 7.47 per cent.

He further added that, mid-cap and small-cap are higher beta stocks than Sensex scrips.

High-beta stocks are supposed to be riskier but provide a potential for higher returns; low-beta stocks pose less risk but also lower returns.

Large blue-chip stocks are usually held by big investors and they do not worry about small fluctuations.

From the small-caps, shares of scrips like Jubilant Foodworks, Bata India, HDIL, Lanco Infra and Orbit Corp have surged by 70 per cent, 65.55 per cent, 24.69 per cent, 26.73 per cent and 57.74 per cent, respectively.

Most stocks in the mid and small-cap segments were beaten heavily during 2011, as their financial performance was impacted by rising interest rates, analysts said.

The mid-cap and small-cap indices plunged by 34 per cent and 42 per cent, respectively, during 2011. On the contrary, the Sensex slumped about 25 per cent during the same period as investors bet that large-caps could weather the storm better than their smaller peers.

Macroeconomic headwinds on the global and domestic front and concerns over policy reforms influenced the market through out 2011.