- Smallcap index rose 2.4% to 16,061, reaching pre-war levels last seen on February 27
- Nifty 50 remains down 3.8%, while Midcap 150 is about 400 points below pre-war closing
- Experts see better value in small-caps and expect stock picking to be rewarded soon
The Nifty Smallcap 250 index has erased all losses from the US-Iran war that started late February, beating the blue-chip Nifty 50 and the Nifty Midcap 150 indices.
The smallcap gauge gained as much as 2.4% on Wednesday, hitting 16,061 points, a level last seen on Feb. 27 before the outbreak of the US-Israel war with Iran.
The price-to-earnings ratio has risen to 28.4 from the March low of 23.4, according to data from Screener.
On the other hand, the Nifty 50 comprising the largest and most liquid stocks traded on the NSE is still down 3.8% from the day before the war started.
The Nifty Midcap 150 is also around 400 points below the Feb. 27 closing mark.
Investors turned optimistic about easing tensions in the Gulf as reports said Washington and Tehran considered talks to end the war after last weekend's fallout. Oil prices remained below $100 per barrel.
Flows to small-cap mutual funds in March surged 61% from a month ago to Rs 6,300 crore, according to industry data released last week, as retail investors bought into the war-driven declines.
Pankaj Tibrewal, founder and chief investment officer of IKIGAI Asset Manager, told NDTV Profit he currently sees greater value in small-cap stocks compared with mid- and large-cap stocks. He noted that many stocks in the broader market are now offering a meaningful margin of safety after recent corrections.
According to the fund manager, stock picking is likely to be rewarded over the next 12 to 18 months as valuations normalise and fundamentals reassert themselves. He believes that value growth will start to take charge once prices begin to rise, marking a shift from the recent market phase.
Tibrewal pointed out that volume growth has dominated the market over the last two years, but there is now a sharp divergence between volume growth and value growth. This gap, he said, is creating selective opportunities for investors willing to focus on fundamentals rather than momentum alone.
ALSO READ: Iran War Impact: Three Reasons Why Markets Will Gain In Trade Today
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