Small-Cap Stocks Expected to Outperform Over Next 12-18 Months, Says Analyst
Small-caps likely to outperform over 12 - 18 months: Jyotivardhan Jaipuria
Business StandardImage: Business Standard
Analysts predict that small-cap stocks will outperform large-cap stocks over the next 12-18 months, with expected returns of 20-25% compounded. The BSE Smallcap index has rebounded 18.7% from recent lows, while large-cap indices like the Nifty 50 and Sensex have shown smaller recoveries of 7.2% and 7%, respectively.
- 01Small-cap stocks have rebounded 18.7% from recent lows, outperforming large-cap indices.
- 02Analyst Jyotivardhan Jaipuria expects 20-25% compounded returns for small-caps over the next two years.
- 03Small-cap balance sheets are healthier, with a net debt-to-equity ratio of 0.35x.
- 04Historically, years of small-cap underperformance are often followed by sharp recoveries.
- 05Small-caps are currently trading at a one-year forward P/E of 19.8x, in line with five-year averages.
Advertisement
In-Article Ad
The BSE Smallcap index has shown a significant recovery of 18.7% from its recent low of 43,218.12 on March 30, 2026, closing at 51,306.25. In contrast, the Nifty 50 and Sensex indices have only recovered 7.2% and 7%, respectively. Analysts, including Jyotivardhan Jaipuria, founder and managing director of Valentis Advisors, predict that small-cap stocks will outperform their large-cap counterparts over the next 12-18 months, with expected returns of 20-25% compounded. This optimism is based on the recovery in the earnings cycle and healthier balance sheets, as small-cap firms maintain a net debt-to-equity ratio of 0.35x, suggesting they are better positioned to weather economic downturns. Small-cap valuations are currently in line with their five-year averages, although they are trading at a 10-15% premium to long-term averages. Historically, after a year of underperformance, small-caps have typically rebounded sharply, with median returns during upturns reaching 137%. Jaipuria notes that while the current upcycle may yield returns of 50-60% over the next two years, it could be weaker than historical trends due to higher starting valuations.
Advertisement
In-Article Ad
Investors in small-cap stocks could see substantial gains over the next two years, potentially enhancing their portfolio value significantly.
Advertisement
In-Article Ad
Reader Poll
Do you believe small-cap stocks will outperform large-caps in the next 12-18 months?
Connecting to poll...
Read the original article
Visit the source for the complete story.



