Mumbai, Jun 28 (IANS): Mid cap and small cap segment which have largely outperformed the large cap space amid the pandemic are likely to witness robust earnings during the period of FY21-23.

"Given the significant loss pools in the small and midcap indices, earnings growth expectations over FY21 -23 are steep and not comparable to the NIFTY50 growth," said an ICICI Securities report.

However, removing the loss to profit companies the growth expectations of mid and small caps appear stronger than Nifty50 especially in FY23, it added.

The broader markets, especially in the small cap space 'margin of safety' in terms of valuation discount had improved considerably by the end of CY19, and remained so as of September 2020.

"Since then small and midcaps have significantly outperformed the Nifty50 despite the economy going through a technical recession thereby, fuelling fears with regards to their valuation discount to largecaps," the report said.

The report noted that large caps have a trailing earnings yield of 3.5 per cent while mid, small and micro caps continue to yield higher at 4.2 per cent, 4.5 per cent and 6 per cent, respectively.

"While the yield spread of mid and small caps over large caps has dipped sharply since the end of CY19 due to their outperformance, it has not disappeared or turned negative, which typically coincides with the peaking out of mid and small caps," it added.