The BSE small-cap and mid-cap indices have underperformed their large-cap peer this year so far witnessing losses of up to 25.3 per cent.
The broader market benchmark Sensex, which tracks 30 bluechips, has gained about 2 per cent this year so far.
As per the study of indices from January 1, 2013, to October 4, the BSE small-cap index dropped by 25.32 per cent to 5,565.54 points, while the mid-cap index declined by 20.37 per cent to 5,731.01 during the period.
The Sensex, however, rose by 1.71 per cent to 19,915.95.
Analysts said that mid-caps and small-caps have underperformed their large-cap peers primarily due to low participation from investors.
Buying appetite is missing in small and mid-cap stocks and large-caps are more in favour since they are in the trading portfolio of most of the funds, experts added.
"Most of the small and mid-cap stocks have hit the bottom. As these stocks are over-suppressed, they may bounce- back over the next 12 months," said Kishor Ostwal, CMD, CNI Research.
During the period under review, the Sensex touched its 52-week high of 20,739.69 on September 19. The mid-cap index scaled its one-year peak at 7,391.34 on January 9, while the small-cap index hit its 52-week high at 7,696.74 on January 7.
Marketmen said retail investors have large exposure to mid-cap and small-cap stocks and in the last few months the retail segment activity has dropped significantly. When things become worse, fears make investors exit these stocks at the lowest valuations, they noted.
The mid-cap and small-cap indices track the performance of companies with market capitalisations that are a fifth or a tenth of that of blue-chip firms.