Only investors with a long horizon should enter mid- and small-cap segment

After the outperformance of the past three years, they should be prepared for modest returns in the near term

The S&P BSE Midcap Index and the S&P BSE Smallcap Index have given returns of -4.3 per cent and -4.5 per cent, respectively, over the past three months. The Sensex has fared slightly better (-3.3 per cent). Some market experts are currently recommending a complete exit from mid-cap stocks as they tend to underperform during times when the Reserve Bank of India (RBI) is withdrawing liquidity. Should you take such a drastic step?

Myriad headwinds

Earnings downgrade: The mid- and small-cap segments face several headwinds currently. Says Anupam Tiwari, equity fund manager, Axis Mutual Fund: “This segment faces potential earnings