Froth in mid-caps, small-caps remains: Jimeet Modi

Mumbai: Mid-cap and small cap shares may extend their underperformance in the coming months, as froth in valuations from the bull run is yet to recede entirely, said Jimeet Modi, founder of financial services firm Samco Group. "Even after a 20% to 25% correction in those indices, the froth remains. Five-year bull markets actually do not get unwound in five months. It will probably take at least 20% to 30% of the time of that bull market to unwind all the froth and all the excess that has been created," he said in a press meet on Tuesday.

Various other indicators pointed to the strength of large caps in the current scenario.

Modi said the ratio of relative valuations of Nifty's top 100 companies to Nifty 500 companies has just started reversing from a 20-year low period, and the top 100 could outperform the rest of the companies by a factor of as much as 15-30%.


The market breadth has also peaked, which is the relative measure of the Nifty 500 equal weight index to the Nifty 500, and is now seeing some downward movement from its high made in the second half of 2024.