SENSEX-30 OR BSE-500

The rally, which was hitherto restricted to large-caps, has begun to spread to mid-caps and small-caps. But volatility will continue and this will not be a completely secular boom

- Yagnesh Kansara

The stock market exhibits a peculiar characteristic. It takes note of every small negative input and reacts disproportionately to it during a bear phase. When the bulls go on the rampage, it ignores the biggest of the adverse news. The current boom period shows rational expectations and irrational exuberance associated with the latter.

The unanticipated rise of the Sensex and Nifty in recent months implied that the bull run was restricted to a handful of large-cap stocks of renowned companies. Some of you were fortunate enough to benefit from this rally, but many missed the profitable bus. Today, these large-caps are too expensive, and beyond the reach of small investors.

But wait, don’t be disheartened. In the last three months, the indices for small-caps and mid-caps outperformed the ones for the large-caps. The Nifty Mid-Cap 50 and Nifty Small-Cap 50 have recovered to pre-COVID levels but, unlike the Sensex, they haven’t touched their respective all-time highs

Having added over 1,000 points every month since May this year, the BSE Small-Cap and Mid-Cap indices had zoomed 95 per cent and 77 per cent, respectively, by November 27. These, however, were below their all-time highs of above 20,000 points and more than 18,000 points, respectively.