A Tale of Two Markets
The performance of large-cap and small-cap stocks has been diverging significantly in recent years. In the United States, large-cap stocks have outperformed small-cap stocks, while the opposite is true in India.
The Indian Market
In India, the small-cap index has risen dramatically compared to the large-cap index. This trend has persisted for nearly four years, suggesting that small-cap stocks may be poised for a potential correction. However, it’s important to note that this doesn’t necessarily mean small-cap stocks will crash. Instead, large-cap stocks may simply outperform small-cap stocks, causing the ratio between the two to decline.
The U.S. Market
In the United States, the situation is reversed. Large-cap stocks have been dominating the market, while small-cap stocks have struggled. This divergence may be attributed to factors such as liquidity flows and the overall health of the economy.
A Cyclic Relationship
It’s important to remember that the relationship between large-cap and small-cap stocks is cyclical. Over time, both types of stocks tend to outperform each other at different points. Therefore, it’s unwise to assume that one type of stock will always outperform the other.
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