Big risks in small stocks

Prices are moving ahead of fundamentals

The stock market has seen a sharp runup in 2023 with major indices such as the Nifty rising to new record highs. But a far stronger bull run has occurred in the smallcaps and midcaps. Since January, the Nifty is up a little over 10 per cent, while the Nifty Midcap is up 27 per cent and the Smallcap has increased 28 per cent. The rally in smaller stocks has, in fact, been so strong that there is concern of overheating. It is hard to justify this rise in terms of fundamentals because the pace of earnings growth has slowed.