Is money chasing mid and small caps?

There is a popular belief that money is chasing small and midcaps. While this belief is true, the money is also chasing large caps. Let us consider two periods. One, when markets rallied for 2 months in Aug to Oct 2007 period. Two, when mid & small caps rallied from 23rd Nov onwards (till 17th Dec 2007). In period ONE, the returns of Nifty was 39%, midcaps was 29% and small caps was 24%. In period TWO, the small caps topped with returns of 18% while mid caps clocked 14% and Nifty a tepid 4%. Let us look at the parameter ‘Turnover per day’ in each category. Nifty saw Rs 8307 cr in period ONE vs Rs 9206 cr in period TWO, an increase of 11%. Midcaps saw Rs 2094 cr vs Rs 3227 cr, an increase of 54%. Small caps saw Rs 1698 cr vs Rs 2137 cr, an increase of 26%. This data indicates that while chasing increased in midcaps, the large caps still draw the highest amounts.

Further to this, Turnover per Day(tpd) for individual stocks will indicate which is in or out of favor. In case of Nifty stocks, RPL’s tpd increased by Rs 725 cr (161%), Sterlite by Rs 187 cr (196%) and GAIL by Rs 121 cr (234%). Incase of midcaps, it is Essar Oil by Rs 711 cr (2881%), Ashok Leyland by Rs 114 cr (404%) and HOEC by Rs 69 cr (1830%). This trend will indicate in which counters traders should be in to execute their trades.