Small-caps outperform large-caps but fail to match mid-caps in August

The small-cap universe outperformed large-caps, but failed to match the returns generated by mid-caps in August.

The Nifty Smallcap 100 Index rose 4.9 per cent. By comparison, the Nifty50 Index rose 3.5 per cent and the Nifty Midcap 100 soared 6.2 per cent. This was only the third calendar month in 2022 when the small-cap index has outperformed the large-cap-oriented Nifty50 Index.

Meanwhile, the small-cap index has outdone the mid-cap index only once this calendar year.

On a year-to-date basis, the Nifty Smallcap 100 Index is down 15 per cent, even as the Nifty Midcap 100 and the Nifty50 indices have gained 3.41 per cent and 2.34 per cent, respectively.

Analysts say an uncertain outlook for the equity market, coupled with sharp earnings downgrades, has weighed on the performance of small-caps.
 

In a report earlier this month, BofA Securities highlighted that the earnings estimate for the Nifty Smallcap Index has been cut by 7 per cent and 1 per cent for 2022-23 (FY23) and 2023-24 (FY24), respectively, this year.

By comparison, the Nifty Midcap pack has seen an earnings upgrade of 5 per cent and 8.7 per cent for FY23 and FY24, respectively.