Time to Shift to Large Caps?

Considering the sharp correction in Mid-Cap and Small-Cap stocks, is it time to reallocate funds toward Large-Cap investments? - Mitali Shah 

Editor Responds: Market cycles influence the performance of large, mid, and small-cap stocks differently. Mid-cap and small-cap indices lagged from 2017 to 2019 when the BSE Large-Cap Index delivered a 45 per cent return. However, after the 2020 COVID downturn, mid-and small-caps staged a strong comeback, significantly outperforming large caps. This highlights the importance of diversification and timing in portfolio strategy, as different market phases favour different segments. 

Large-cap stocks offer stability and lower volatility, while mid-caps and smallcaps provide higher growth potential but come with greater risk. The recent correction in mid and small-caps raises concerns, but shifting entirely to largecaps may not be ideal. Instead, a balanced approach—maintaining stability with large caps while selectively holding quality mid-caps and small-caps—can optimize risk-reward. Investors with a long-term horizon should focus on fundamentals rather than short-term market trends, using downturns as buying opportunities while aligning investments with their risk appetite and financial goals. We are featuring a special story on large-cap stocks in our upcoming issue. Stay tuned!