Small- and mid-caps set to top asset class league after a gap of five years

Small- and mid-caps are set to top the asset class league table for the year after a gap of five years. The Nifty Midcap and Smallcap 100 indices have by far the best returns among various asset classes so far this year. Meanwhile, gold — best-performing asset class of 2020 — currently is languishing at the bottom of the table with returns of negative 6 per cent. The returns on debt investments too have yielded barely any returns following double-digit gains in the preceding two years.
 
After a stellar 2017, the returns for small- and mid-caps had slumped into negative territory in the following two years. Over a 10-year period, gold, bonds, overseas and domestic equities have taken turns as the best asset class. Experts say the secret to generate good long-term returns is spreading one’s bets across asset classes.
 
“Asset allocation and sector rotation will be keys to generate outperformance in 2021. The equity market is likely to be the best performing asset class for the next 1-2 years. While exposure to equities should not be reduced, focus on a quality theme as well as bringing down portfolio risk through specific sectors should be a strategy going forward,” says Axis Securities in a note.