In 2023, as equity markets surge, mid and small cap segments are gaining attention with significant fund flows. This is because, 1. Time correction and earnings catchup: Mid and small caps endured a period of time correction, with improved earnings, resulting in reasonable price to earnings ratios. 2. Higher returns with extra volatility: Historical data shows mid and small cap funds delivering higher returns with slightly more volatility, offering a better risk-return profile. 3. Growth tailwinds: These segments benefit from agility and growth potential, particularly in a growing market with initiatives like "Make in India" and "China Plus One." 4. Undiscovered gems and new themes: Mid and small caps often represent undervalued opportunities with unique themes like AI, IoT, and more, which are less prevalent in large caps. 5. Less institutional coverage: With less institutional attention, mutual funds can make informed decisions based on research, avoiding herd mentality.