In 2025, India’s mid-cap and small-cap stocks are expected to play a significant role in generating alpha for investors. Suresh Malhotra, Chief Investment Officer at Anand Rathi, believes that this segment of the market offers promising opportunities for those willing to navigate the volatility with a strategic approach.
“Mid-cap and small-cap stocks often serve as the growth engines of the equity market,” says Malhotra. “They are typically more agile and better positioned to capitalize on emerging trends, especially in India’s rapidly evolving economy.” With government initiatives promoting digitalization, financial inclusion, and green energy, many of these companies are poised to benefit from increased demand and investment.
According to Malhotra, sectors such as technology services, specialty chemicals, and renewable energy are likely to see above-average growth. “Investors should look for companies with robust fundamentals, strong management teams, and clear growth strategies,” he advises. These attributes can help mitigate the inherent risks of investing in smaller companies.
However, Malhotra cautions that mid-cap and small-cap investing comes with its own set of challenges. “Volatility is higher in this space, and liquidity can sometimes be an issue,” he notes. “It’s essential to have a disciplined approach and diversify investments across sectors to manage risks effectively.”
Anand Rathi’s research team is closely monitoring these segments and providing tailored investment strategies for clients. “We’re focusing on identifying companies that have demonstrated resilience and adaptability,” says Malhotra. “This includes firms that are leveraging technology to gain competitive advantages or those that are leading the way in sustainability practices.”
In addition, regulatory reforms and improved market infrastructure are expected to enhance investor confidence in these stocks. “The introduction of new frameworks for transparency and governance is creating a more investor-friendly environment,” Malhotra explains. “This is crucial for attracting both domestic and foreign investments into the mid-cap and small-cap segments.”
For investors seeking to outperform the broader market, mid-cap and small-cap stocks present a compelling case in 2025. “With the right research and a long-term perspective, this segment offers substantial opportunities to generate alpha,” Malhotra concludes.