Market Capitalization and Equity Performance: Empirical Insights From Emerging Markets

Stock price behavior is a complex phenomenon influenced by firm, industry, and macroeconomic factors, making precise forecasting challenging. Investors, analysts, and portfolio managers rely on historical data to guide their decisions, employing strategies such as bottom-up and top-down investing. While bottom-up investing emphasizes firm-specific fundamentals, top-down approaches focus on industry and macroeconomic conditions. This study investigates the impact of firm-specific factors—net sales, net profit, and Earnings Per Share (EPS)—on stock returns in India, adopting a bottom-up perspective. Unlike previous studies that primarily focus on large-cap companies, this research considers stocks across all market capitalizations: large-cap, mid-cap, and small-cap. By examining differences in volatility, growth potential, and stock performance across these categories, the study provides a comprehensive understanding of how company fundamentals influence equity returns in diverse market segments. The findings contribute to investment decision-making and portfolio management strategies in emerging markets by highlighting the significance of firm-specific factors across different market capitalization groups.