Indian Stock Market and Mutual Funds

thelamar said:
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What was your rationale for selling Nifty futures and expecting a 2% correction next week? Are you tracking FIIs/DII activity, open interest, or basing this trade on fundamental/technical analysis? Since you’ve already sold futures, I assume you’ve done your analysis. If you sold 2 lots, as your target suggests a 40K profit on a 2% fall, do you have a stop loss in mind? Are you hedging or holding the position naked? I did a small analysis on the daily timeframe, though it’s not my usual timeframe, but sharing it here in case it helps
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I saw the move as a pullback not as a bullish reversal , that was the only logic and it's a very common pattern.
 

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Markets don't care about analysis and these patterns work in probability so pattern failure will be common.
If one is trading, then your plan should already be tested and set. And you should know when to exit, whether in loss or profit.
Other people's view does not matter. Just take the trade and manage it and repeat.

Above can be a pullback short, or looking at the short term momentum ( bounce wasn't that weak), it could be a pullback long in lower timeframe too.
Either could win and both could be good trades in 2 different systems.
 
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the beauty of volatile market is it falls and rises quickly , if you have risk capacity than put good ammount on shares which toggle alot something like good small caps or midcaps ,they will generate lots of wealth but the risk appetite is invovled
 
gourav said:
That's true for individual stocks, not the market as a whole. The markets will recover, be it small cap or large cap. If something so serious happens that small caps as a whole never recover, then large caps aren't recovering either
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It was referring to small cap stocks only, not indices. That being said, the market you’re referring to will definitely recover, but that does not guarantee that small cap stocks will recover to the same extent. For example, most small-cap stocks behave like OTM options, when the market goes up, they may also rise, but not by much. However, when the market falls, they tend to drop even harder.
Small cap stocks are more volatile compared to mid and large cap stocks due to their weaker fundamentals, lower liquidity, and limited institutional backing. They fall even harder during market falls because they are more sensitive to market sentiment and economic conditions. There’s a reason they’re called "small caps" they typically have smaller balance sheets, higher debt ratios, and are often the last choice for cautious investors. When the market falls, small cap stocks face the highest selling pressure, which causes them to drop even further.
 
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thelamar said:
For example, most small-cap stocks behave like OTM options, when the market goes up, they may also rise, but not by much. However, when the market falls, they tend to drop even harder.
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This makes no sense when comparing with real world data. This would imply that overall growth in small caps is lower - because they "fall harder" and rise "not by much". But since 1 Mar 2019 to today, NSE small cap 100 has risen 2.25 times, whereas nifty 50 has risen 2.07 times.

I've seen many other periods, small caps have typically outperformed nifty significantly in any period that includes a few ups and downs - say 5 years or above.
 
kiran6680 said:
This makes no sense when comparing with real world data. This would imply that overall growth in small caps is lower - because they "fall harder" and rise "not by much". But since 1 Mar 2019 to today, NSE small cap 100 has risen 2.25 times, whereas nifty 50 has risen 2.07 times.

I've seen many other periods, small caps have typically outperformed nifty significantly in any period that includes a few ups and downs - say 5 years or above.
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From what i have read a decade ago, midcaps overall, over long term, do better with lower risk. You probably need a certain size to improve odds of survival.
This small cap mania in last few years was a bit unique perhaps, dunno.

There is no reason to believe that the smallest companies would do better overall that larger ones. They will have harder to compete sometimes against larger players ( but can grow fast if things work out)
Look at us markets, Russell hasn't been doing that good vs larger indices.

Markets get different mania/fear from time to time and then later they forget about it. Few years back, it was quality, psu was a big no. Value wasn't doing well.
In 2000s it was infra and similar which got over after 2008.
Before covid fall, small/midcaps had struggled for many years and large caps did better. Value struggled.
Here just some random article about them from 2019.

www.businesstoday.in

Not only 2019, the entire decade belonged to largecaps

If you had made a lumpsum investment of Rs 1 lakh in Sensex on Jan 1, 2010, you would have collected Rs 2.33 lakh by now
www.businesstoday.in www.businesstoday.in

i think small caps was a similar phase and its probably over now and will revert to mean. People went batshit crazy chasing the smallest companies, going after sme ipos and what not. Pura pp water balls type herd thinking.
In my experience, once this happens and things reverse, it isn't easy for that theme anymore.

But no one can know for sure, maybe there is more steam in small cap bull market who knows.
 
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They definitely fall the most in crashes.
Retail putting so much money ( read that they were putting more than Large caps in monthly net inflows) into not liquid smallcaps makes it even more vulnerable now.
Liquidity disappears on crashes.

Rest is cyclical, sometimes they might move faster sometimes slower.

Anyway, pessimism is also the highest during falls. We could simply start getting good news and markets goes back up. Hard to predict these things.
 
All this crazy hoopla going on lol .. long term investors should dump more money in their mutual funds and chill out!
kiran6680 said:
I am not believing that either. I am only saying that the almost opposite assumption, "small caps fall harder and rise slower" is clearly not sustainable.
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Small caps fall and rise harder.
 
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Tracer_Bullet said:
From what i have read a decade ago, midcaps overall, over long term, do better with lower risk.
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Some recent data behind this too. Overall small caps generally lag behind midcaps.
Anyway, its very hard for people to ignore things that made large % moves recently, extrapolating same into future. Just how it is ...

freefincal.com

Is there any proof small cap mutual funds would outperform in the long term?

Every time stocks in the small cap universe move up prominently, interest in small cap mutual funds and confidence in this sector zoom up even more.
freefincal.com freefincal.com
 
Tracer_Bullet said:
Some recent data behind this too. Overall small caps generally lag behind midcaps.
Anyway, its very hard for people to ignore things that made large % moves recently, extrapolating same into future. Just how it is ...

freefincal.com

Is there any proof small cap mutual funds would outperform in the long term?

Every time stocks in the small cap universe move up prominently, interest in small cap mutual funds and confidence in this sector zoom up even more.
freefincal.com freefincal.com
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It is just that these small caps are prone to manipulation and insider trading. If a fund is not in at the right time, they will probably catch it at the wrong time. The volatility and manipulation makes it really difficult to predict compared to mid caps which are more serious businesses looking at long term growth.
 
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