5 REASONS WHY SMALL IS BIG

Reason 1: There are enough opportunities in an overpriced" market

The market as it is currently today can be broadly divided into two broad categories of companies.

Companies whose market capitalizations may have exceeded their market potential e. g. Capital goods, Infrastructure,Software. They have already generated huge levels of institutional interest during the course of the bull-run.

Companies, where the market potential is greater than their market capitalization. These companies represent emerging sectors like Healthcare, Retail, Agriculture, Financial services to name a few.

Reason 2: Small and mid-cap stocks have higher growth rates

The higher growth of these small and mid-cap stocks has generally provided higher returns across markets. INDIA  USA

Past performance may or may not be sustained in the future.

Reason 3: Burn-out risk for smaller companies has considerably declined

The fact is that smaller sized companies have the potential to provide higher growth rates, but in the changing environment they do so with considerably lower risk. Equity capital is easily available, leverage is low and business cycles are less severe (with 6% GDP growth year being considered a poor year). In our view small and mid sized companies offer excellent investment opportunities.

Reason 4: Selection based on the position in the growth - cycle stage

Most use market capitalization as a defining tool, we use the position of the company in the growth cycle to define investment opportunity

Reason 5: Picking winners in the Small/Mid Cap requires skill

While 83% of schemes in the large cap category have outperformed the BSE SENSEX only 19% of schemes in small & mid-cap category managed to outperform market index S&P CNX Mid-Cap Index (source: ICRA Online). It therefore requires a different skill-set to identify stocks in the small & mid-cap segment. Standard Chartered Mutual Fund has displayed its skill in the past when it comes to stock picking in this space.