Broader market outperforms in May for the first time since January

Experts say valuations of several mid- and small-caps are compelling and companies with strong balance sheets can generate superior returns
May was a weak month for the market, with the benchmark indices logging negative returns. The bright spot, however, was the broader market outperformance.

For the first time since January, the three key indices representing the broader market — Nifty 500, Nifty Midcap 100, and Nifty Smallcap 100 — outperformed the benchmark Nifty 50 index. Though the broader markets delivered negative returns, the fall was less compared to the benchmark.
The broader market, despite the negative undercurrent, is a positive sign, which underscores that investors are willing to look beyond the frontline stocks. During the market crash in March, the broader markets had suffered more than the benchmarks, with index levels plunging to five-year lows. Experts say valuations of several mid- and small-caps are compelling and companies with strong balance sheets can generate superior returns.

They, however, say one should avoid blindly investing in this space as smaller companies are more vulnerable in a deteriorating macro environment.



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