New Delhi, Oct 22 : Small and mid-cap stocks have been the driver of the post-Covid recovery in the markets. Some froth may recede in the coming quarters, but the medium-term outlook remains robust.

Earnings growth has been democratised in India with broader participation across companies, which is reflecting in SMIDs enjoying their time in the sun. Fragmented industrial sectors, with no clear leaders, reinforce the momentum, Emkay Global Financial Services said in a note.

“We see broader markets moving sideways with a negative bias for the rest of FY24. The longer term top-down narrative remains attractive, with small and mid caps leading the markets for the next 2-3 years”, the report said.

The report pointed to three key themes on stocks:

Manufacturing: A multi-year growth trend that is yet to fully play out. This includes capital goods, auto ancillaries, chemicals, metals, and pharmaceuticals. The focus of this theme will be SMIDs, as there are few large caps available.