Mid & Small caps to offer opportunities but tough times may still be on horizon

The Indian benchmark indices are trading at all-time high and the momentum seems quite positive. On Thursday, the Sensex closed above 41,000 for the second time. But are 'markets' really at the top or its just few major companies of the indices, which are taking it higher?

To understand this we did a study, where we took the market cap data of all the stocks as on January 31, 2018, when the Sensex had touched its lifetime of that time. We compared that market cap data of companies from then to the their market cap on November 28. Some really interesting facts about the market appeared as a result of this comparison. This week, Reliance Industries Ltd. became first Indian corporate to cross Rs. 10 Lakh crores market capitalization. During the period of our study , RIL saw a jump of 63 per cent in its full market cap. According to latest market capitalization data ,top 50 companies added Rs. 2,173,449.88 crores to their total market cap. Several stocks, such as Bajaj Finance, Nestle India, HUL, and Kotak Mahindra Bank, showed a jump of 156.23 per cent, 95.39 per cent, 52.81 per cent, 46.27 per cent, respectively, in their market cap.

More importantly, out of almost 3500 BSE listed companies, only 346 companies saw increase in their market capitalization during the period of our study. The overall market of these 346 companies make 62.9 per cent of the total market cap of 3,500 BSE listed companies. This certainly makes a point here that the broader indices have underperformed. Robust gains in the indices are backed by just few set of corporate giants. The conclusion that can be drawn from this is we are surrounded with ample opportunities in small caps. However, considering current economic condition and slowdown, we may also face more worst market performance, going ahead.