Year Ender 2023: Small stocks become Dalal Street’s first choice in 2023

Small stocks remain the first choice of Dalal Street in 2023. 2023 has proved to be a profitable year for the equity market due to the country’s improving economic fundamentals and heavy retail investor participation. Experts believe that the bullish trend in the stock markets has been going on for a long time. The midcap and smallcap segments are outperforming their larger counterparts. This year till December 22, the BSE Smallcap index gained 13,074.96 points or 45.20 percent, while the Midcap index gained 10,568.18 points or 41.74 percent. During this period, BSE’s 30-share index Sensex rose by 10,266.22 points or 16.87 percent. On December 20 this year, the Smallcap index reached its all-time high of 42,648.86 points and on the same day, the Midcap index also reached its record peak of 36,483.16 points.

The BSE index also reached its all-time high of 71,913.07 points on December 20. The midcap index tracks companies whose market capitalization is on average one-fifth that of ‘blue chip’ (companies with high share prices), while small-cap companies account for about one-tenth of that. Analysts attributed the rally in the equity market this year to better domestic macroeconomic fundamentals and retail investor confidence. “When the overall economy strengthens, the smallcap and midcap segments perform well,” said Mukesh Kochhar, national head (wealth), AUM Capital.

Kochhar termed 2023 as a “big year” for the equity market. “We have seen new highs with broad participation,” he said. Experts believe small stocks may see a near-term correction after a massive rally in 2023. After the correction, Small stocks will again become the first choice of Dalal Street in 2024. After a turbulent start, the market regained its shine in the last half of the year. Smallcap and midcap indices had hit their 52-week low on March 28 this year. The BSE Smallcap index hit its one-year low of 26,120.32 points on March 28, while the Midcap index hit its 52-week low of 23,356.61 points on the same day. On March 20 this year, the BSE Sensex index reached its one-year low of 57,084.91 points.

Investors had to contend with a host of negative news, from turmoil at major global banks to macroeconomic concerns. However, the market bounced back in November and December. Analysts believe that small stocks are generally bought by local investors while foreign investors focus on ‘blue chip’ or larger companies. Palka Arora Chopra, Director, Master Capital Services Limited, underlined several factors that were the main reasons for the market rise this year. Also, read this.