Mumbai, Jul 29 (PTI) After three years of underperformance, midcap and smallcap stocks will outperform the largecap ones in the next three to five years, a report by a private sector asset management company said on Thursday.

The battered realty sector is also headed for a revival on the back of low interest rates, the trend of work from home and industry consolidation triggered by introduction of regulatory oversight, Aditya Birla Sunlife AMC said.

"After three years of underperformance (mid and smallcaps) should outperform large caps, led by economic recovery, lower interest rates, and increased representation in emerging sectors like chemicals and digital platforms,” the asset manager said in its 'trendspotting report'.

Interestingly, the mention of digital platforms comes at a time when a slew of players, including Zomato, Paytm, Nykaa etc have listed or are headed for listing.

The other trends include a surge in manufactirng on the back of global supply chain realignments and programmes like Aatmanirbhar Bharat, greater digitalisation driving productivity gains at corporates, and rising risks from environment pushing government and companies to adopt more sustainable way of doing business through green fuel, green technologies, and green mobility, it said.

"We believe that the key to successful investing over a long period is an ability to spot trends. Looking at data since 2002, the top five performing sectors vary greatly in each market cycle,” the company's managing director and chief executive A Balasubramanian said.

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