covid-19 pandemic economy crisis

Despite big correction, mid-cap valuations still at premium to large-caps

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Small- and mid-cap companies often end up at extreme ends of market and economic cycles. This time is no different. While the large-cap Nifty 50 has been hammered down 26% from its highs in mid-February, the Nifty Midcap 100 index has fallen 32%.

But that does not mean that mid-caps are now relatively inexpensive. In fact, the large-caps’ 12-month trailing valuations are about 17.4 times compared to the Nifty Midcap 100’s price-earnings multiples of 18.7 times, shows Bloomberg data.

This suggests that the Nifty Midcap 100 is still slightly overvalued in relation to large-cap stocks. With the lockdown extended by another 19 days, the economic impact on small- and mid-cap companies may be overwhelming.

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