‘Small-cap and mid-cap froth spreading into large caps’

The froth in small-cap and mid-cap stocks is trickling into large caps, said Ajit Dayal, founder, Quantum Advisors, parent of Quantum Mutual Fund. He advised investors against putting all their money into equities at this juncture

"When you take a cup and fill it with foam, it spills over into the saucer. That saucer is large-cap," said Dayal on the sidelines of a corporate governance event organised by the asset manager on Friday. "Some of the money that has not gone into the small- and mid-caps is moving into the large-cap space."

So far in 2024, Nifty is up 12.8%, while the Midcap 150 and the Smallcap 250 have gained nearly 21-22% each.


Dayal is bullish on the Indian economy and corporate earnings but is uncomfortable with the share valuations.

"Earnings story is good but the price people are willing to pay is a little crazy in our perspective," he said.

Dayal had a word of caution for small-cap and illiquid stocks.

"We don't know what or when the crisis will happen but whenever it happens, we always see illiquid stocks and small-cap stocks get hurt the most in every cycle," he said.

"We will see that again; it's going to happen although I don't know the time, but I can tell you the outcome. The outcome will be people will lose money, lose faith in MFs and withdraw from MFs."