In 2017, a prominent investor asked me what it would take for the exuberance in mid and smallcap stocks to subside. At the time, Indian markets were awash with liquidity following demonetisation and the implementation of GST.
Equity mutual fund inflows had surged to nearly $2.4 billion (Rs 20,000 crore) per month, roughly four times the pre-demonetisation average, while smallcap stocks traded at valuation multiples approaching twice those of the Nifty 50.
