Aniruddha Naha, Chief Investment Officer at PGIM India, highlights the importance of fundamentals in small-cap investing, asserting that sustainable wealth is built on strong earnings, healthy cash flows, and robust balance sheets. He notes that while narratives often dominate during bull markets, it is the fundamentals that ultimately drive long-term returns. Naha suggests that the best time to invest in small caps is during market downturns when sentiment is negative, as this is when opportunities arise. He emphasizes that small caps, which are often under-researched, can offer significant alpha generation potential due to pricing inefficiencies. According to Naha, the expected earnings growth for small caps over the next two years is around 22-24%, significantly higher than that of mid and large caps. He advises investors to focus on businesses with strong fundamentals and to be prepared for volatility, as small caps can experience sharp price movements. Ultimately, he believes that with the right approach, small-cap investing can lead to substantial wealth creation over time.