New Delhi, Feb. 19 -- Small-cap and mid-cap (SMID) companies, which outpaced large caps in profitability for most of FY24, have now entered their second consecutive quarter of underperformance, according to Nuvama Institutional Equities. The brokerage attributes this weakness to a domestic slowdown, to which SMIDs are more vulnerable.

Excluding the Banking, Financial Services, and Insurance (BFSI) sector, SMID profit growth has sharply declined and is now contracting on a year-on-year (YoY) basis. In contrast, large caps have demonstrated relatively stable earnings. The only bright spot for SMIDs remains BFSI, where banks continue to post strong profit growth.

Smallcap stocks and Midcap stocks also lag behind large caps in terms of prof...