“Mid- and small-caps, over a five-year period, can still give those 14%-15% kind of returns,” said Singhania, whose firm oversees 400 billion rupees ($4.5 billion) in assets.
Earnings growth in the broader market has outpaced that of companies in the benchmark Nifty 50 index this year, a trend that Singhania expects will continue.
Profits of firms in the Nifty Smallcap 250 index rose 6% in the April-June quarter, their slowest in nine quarters, HDFC Mutual Fund data showed. In contrast, mid-caps grew a robust 17%-24%, buoyed by industrial, technology, and consumer sectors.
“Mid- and small-caps are the bulls and the tigers – they may falter at times, but when they run, they will really run fast,” Singhania said.
Indian shares have underperformed regional peers this year, with the Nifty 50 up 6.7% year-to-date, still around 4% below its 2024 peak, while mid- and small-cap gauges are down 4.4% and 8.8% from their respective highs. In comparison, the MSCI Asia ex-Japan index has surged more than 27% year-to-date. Foreign investors have withdrawn $17.6 billion from Indian equities this year, their second-highest outflow on record for the January-September period, even as resilient domestic flows have helped mitigate some pain. Singhania said overseas interest is picking up again as India remains under-owned in some global portfolios, adding that potential catalysts such as U.S.-India tariff resolution will be “triggers” for investors.
Beyond tariffs, Singhania highlighted easing interest rates, GST reforms, and a better-than-expected monsoon as factors turning last year’s headwinds into tailwinds for India.
“Markets are already starting to see a turnaround,” he said.
($1 = 88.7725 Indian rupees) (Join the Reuters Global Markets Forum and Trading India on LSEG Messenger).
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