Jinesh Gopani, head — equities, Axis MF

We believe that some of the mid-cap and small-caps are back in favour. Earlier, there was significant difference between the return delivered by Nifty index compared with small-cap and mid-cap indices. It was because earnings reported in the festive period did not match expectations. Either growth or margins were sacrificed as oil prices were high and demand in the festive season wasn’t good. But now, these issues are fading out and normalcy is likely to return over the next two or three quarters. With oil and rupee stabilising as well as economic momentum expected to kick in after elections, we believe that macro conditions should improve from here. Besides, the valuation of some small and mid-caps is also reasonable due to significant correction over the past twelve months. Though valuations are not cheap, some mid-caps are falling under our buying zone. And if there is recovery in earnings, then things will start looking up.

Anoop Bhaskar, head of equity, IDFC Mutual Fund

Small and mid-cap stocks were falling without volume in January and February and, if they are rising without volume, then it’s just an artificial rise. In March, too, there was recovery without any significant jump in volume. So, till there is significant change in volume, it will take some time for stock prices to stablise. Most small and mid-cap funds are holding 10% cash, so you will have to see when they will deploy that cash. Valuations are not exactly a screaming buy. I think now institutions have started buying because they don’t want to be left behind. It all depends on liquidity and that you cannot predict. If a stock is going down and you know there is a seller, why would you buy that stock when you know it will fall further? I don’t know if the rally will continue or not but there will a period of consolidation where money and stocks will change hand. Till that process is completed, you can’t say there has been a bottoming out of small and mid-caps.