Chart of the day: Mid-caps may see a sharper bounce-back

Despite the sharp de-rating of Indian stocks over the past three years, the price-to-book values of large-cap indices like Nifty (2.94 vs 3.03) are still trading close to the historic median.

The current price-to-book value is 2.94 compared with the 10-year average of 3.03. Small- and mid-caps have, however, fared the worst with values much lower than the average.

“This is understandable as earnings downgrades have been much more severe for mid & -small caps as they had to bear the brunt of the slowdown pain,” says H Nemkumar, president, institutional equities at IIFL. He adds that the recovery for these companies will be sharper once the broader economy also revives.