The outlook for the mid-cap rally

Valuations of quite a few mid- and small-sized firms have gone through the roof, and it makes sense for investors to be cautious

Mid-cap and small-cap stocks are on fire. The S&P BSE Mid-cap index is at an all-time high and the S&P BSE Small-cap index is close to an eight-year high. But note that in the 10-year period between 2003 and 2013, these two indices had produced fireworks often, only to revert to the mean subsequently (see chart).



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