Midcaps and smallcaps to contribute to profitability this time: Experts

That is likely to change significantly going forward. There are two trends that will play out simultaneously. One is that in several sectors, where there is a large unorganised market and it is fragmented, the leader.

"Capital goods, manufacturing, autos, auto ancillaries -- there are so many sectors which have had very tepid earnings in the last 10 years. Commodities, metals will also contribute to the earnings growth. What we had in the last three-four years was just extreme concentration of profitability at the top. This time, while the top players will continue to consolidate on the profit cycle, we see a much wider breadth of industries starting to contribute to the overall profit pool and that is what we should not miss" say some experts.

Both these trends are likely to play out simultaneously over the next few years. For example, there are new emerging growth stories like specialty chemicals. Look at the aggregate profits of those companies three-four years ago and what could happen to that cohort three to four years down the line. The sector is likely to get much bigger both in terms of market cap and in terms of profitability.

We do not expect the breadth to shorten.We expect the breadth to widen and both mid tier and small tier companies will also contribute to profitability this time unlike in the last few years.

There is definitely a large queue of IPOs of new economy companies. These are going to broaden the opportunity set for investors in the market. Investors have to look at these companies very differently than how they have looked at it traditionally. The path to profitability for these companies is probably going to be longer. It may take anywhere from the next two to four to five years for these businesses to become extremely profitable like some of the great franchises today. But one will have to be very picky and choosy about which of these new age companies to go for.

"Given the fact that the amount of capital available in the capital markets is also growing, we do not worry about the fact that the IPOs are going to draw out all the liquidity like it used to happen in the past. Far more capital is coming into the financial markets and the depth and the participation are improving. The new IPOs can easily be absorbed given the kind of liquidity that we have" opinied the experts.

There are even more sophisticated investors who are willing to take those bets and wait it out before these companies start becoming profitable. There will be intermittent volatility and we are willing to take that, then this is the game for you. Otherwise, just stick to the traditional matrix and it is fine, there are opportunities all over the place.