Midcap-and-smallcap indices, which have more than doubled from March 2020 lows, hit a fresh record high recently and are back on investors’ radar. Historic outperformance should not be the sole criteria while picking stocks. Promoter holding, debt on books, business model, and balance sheet strength would be key factors to look at. Midcap stocks tend to do well when the domestic economy is recovering. Most economists expect the economy to rebound in the second half of the year. Experts see value in those small and midcaps that have a niche business model and are technology-enabled. Stocks in sectors like pharma, telecom, packaged foods, digital, etc. would make the cut.
