Why Mid Caps & Small Caps

Now ?

1
Nifty At Lifetime High Levels But Mid & Small Caps Continue
To Fall Since January 2018
120 Return (%) Nifty 50 TRI 114.3
Index Name (Jan 2018 to June 2019)
Nifty 50 TRI 14.3 Nifty Midcap 100 TRI
110 Nifty Midcap 100 TRI -15.4 Nifty Smallcap 100 TRI
Nifty Smallcap 100 TRI -31.0

100

Rebased to 100

90
84.6

80

69.0
70

60
01-Jan-18 01-Apr-18 01-Jul-18 01-Oct-18 01-Jan-19 01-Apr-19
Past performance may or may not be sustained in future.
Source: Capital Line and Internal Analysis 2
Within Nifty 50 Too Only A Few Are Driving It

Nifty-50 Top-15 Stock (Re-based) Next-35 Stock (Re-based)

14,500

Top 15 stocks delivered return 13,686

of 30%
13,000

Index delivered 11,788

11,500
10,531 12% return

Next 35 stocks delivered

10,000
negative return of 11%
9,333

8,500
Jan-18

Feb-18

Mar-18

May-18

Jun-18

Jul-18

Jan-19

Feb-19

May-19

Jun-19
Apr-18

Aug-18

Apr-19
Nov-18

Mar-19
Dec-17

Sep-18

Oct-18

Dec-18
Past performance may or may not be sustained in future.
Source: Motilal Oswal & internal analysis 3
Divergence Between NIFTY 50 & Nifty Midcap 100 Is At
Historical Extreme
Rolling 1-yr return difference between NIFTY Midcap 100 and NIFTY 50
55%

45%

35%

25%

15%
Average: 4%
5%

-5%

-15% -11%

-16%
-17% -18%
-25% -13%
Jun-10

Jun-13

Jun-16
Jun-06

Jun-07

Jun-08

Jun-09

Jun-11

Jun-12

Jun-14

Jun-15

Jun-17

Jun-18

Jun-19
Past performance may or may not be sustained in future.

Source : Goldman Sachs and internal Analysis 4

Divergence Between NIFTY 50 & Nifty Smallcap 100 Is Also
At Historical Extreme

Rolling 1yr return difference between NIFTY Smallcap 100 and NIFTY
70%

50%

30%

10% Average: 3%

-10%

-24%
-30% -34%

-24%

-50%

Jun-17
Jun-06

Jun-07

Jun-08

Jun-09

Jun-10

Jun-11

Jun-12

Jun-13

Jun-14

Jun-15

Jun-16

Jun-18

Jun-19
Past performance may or may not be sustained in future.
Source : Goldman Sachs and internal Analysis 5
Extreme Divergence In Large, Mid & Small Companies In Terms
Of Fall
Sharp fall in Mid Caps & Small Caps

Market Cap in Lakh Crores

Companies
(Arranged as per M'cap) 31/01/2018 01/04/2018 17/06/2019 Change
0 - 25 61 57 70 15%
26 - 50 20 20 19 -4%
51 - 100 22 20 19 -15%
101 - 250 25 24 22 -12%
251 - 500 14 13 10 -29%
501 - 1350 8.4 7.3 4.5 -47%
Past performance may or may not be sustained in future.

Source: Prospero Tree.com and Internal Analysis 6

Midcap Stocks Market Cap At 5 Year Low

Nifty Midcap-100 (INR t) 26% correction

from peak
21.9

16.7 17.0 16.7

15.9 16.3

11.0
9.0
8.2
6.5 6.7 6.9

3.6
2.8 2.8

Jun-19
Dec-13
Dec-05

Dec-06

Dec-07

Dec-08

Dec-09

Dec-10

Dec-11

Dec-12

Dec-14

Dec-15

Dec-16

Dec-17

Dec-18
Source: Motilal Oswal and Internal Analysis 7
Nifty Midcaps Relative Valuations Vs Nifty 50 Has Corrected
Back To 2014 Lows

Source : Elara Securities Ltd 8

Nifty Smallcaps Relative Valuations Vs Nifty 50 Has Also
Corrected Back To 2014 Lows...

Source : Elara Securities Ltd 9

Improving Liquidity & Reducing Interest Rates Have Helped
Midcaps In The Past.
India Banking Liquidity (INR bn) NSE Midcap Index
6,000

5,000

4,000

3,000

2,000

1,000

-1,000
Liquidity hits low in Mar'16 & System liquidity
-2,000 started improving from there
resulting in a recovery has started improving
-3,000 in the midcap index 6,000
Jan/13

Jan/14

Jan/15

Jan/16

Jan/17

Jan/18

Jul/18

Jan/19
Jul/13

Jul/14

Jul/15

Jul/16

Jul/17
Source : Elara Securities Ltd 10
Dawn After Dusk In Mid & Small Cap In The Past

Mid-Cap returns Small-Cap returns

Next 3-Year Next 1- Next 3-Year

Years Return Next 1-Year CAGR Years Return Year CAGR

2001 -30% 24% 55% 2001 N/A N/A N/A

2008 -59% 99% 18% 2008 -71% 107% 17%

2011 -31% 39% 27% 2011 -34% 37% 25%

2018 -18% ? ? 2018 -32% ? ?

Past performance may or may not be sustained in future.

Mid & Small caps poised to take off ?

Source : Capital Line and Internal Analysis 11
Disclaimer

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

The information contained in this (document) is extracted from different public sources. The information shared is only
to explain the trends in large, mid and small cap market. This is no future prediction of market movement. All
reasonable care has been taken to ensure that the information contained herein is not misleading or untrue at the
time of publication. This is for the information of the person to whom it is provided without any liability whatsoever on
the part of Kotak Mahindra Asset Management Co Ltd or any associated companies or any employee. Investors should
consult their financial advisors if in doubt about whether the product is suitable for them before investing. This
material is for the personal information of the authorized recipient, and we are not soliciting any action based upon it.

These materials are not intended for distribution to or use by any person in any jurisdiction where such distribution
would be contrary to local law or regulation. The distribution of this document in certain jurisdictions may be
restricted or totally prohibited and accordingly, persons who come into possession of this document are required to
inform themselves about, and to observe, any such restrictions.

12
Thank You

13