Mid & Small Caps Outlook: Strong Earnings, High Valuations Make Stock Selection Crucial

Mid and small caps have outperformed large caps as stronger earnings growth and sustained fund flows support several pockets of the market. Siddhartha Khemka, Head of Research, Wealth Management, Motilal Oswal Financial Services, explains why manufacturing, precision engineering and aerospace-related segments continue to attract attention. However, some high-growth stocks are trading at elevated valuations, including above 100 times earnings in certain cases. He says the mid and small-cap space remains a mixed bag, with domestic manufacturing emerging as a key theme. The discussion highlights why investors need to remain selective and focus on sector-specific and stock-specific opportunities