Indian small-caps are only next to Indonesia and have performed better than those in other Asian markets like China, Hong Kong, Taiwan, Singapore, Malaysia and Thailand.

The Citigroup report reveals that Indian small-cap stocks have outperformed their larger peers by 4.3 per cent between October 30 and November 23.

In Indonesia, small-cap companies did better with a relative performance of 5 per cent, while the worst performer among Asian markets was South Korea with a negative performance of 6.5 per cent by such stocks.

The relative performance of small-cap versus larger cap stocks in other Asian markets varied between -2.5 per cent to 2.8 per cent.

Small-cap refers to stocks of companies that have relatively small market capitalisation and the Indian stocks taken for the analysis include ABG Shipyard [Get Quote], Everest Kanto, GSK [Get Quote] Consumer and Nicholas Piramal [Get Quote].

In the year-to-date performance also, Indian small-cap have emerged among best performers with a relative performance of over 10 per cent as against the larger cap companies - better than just about six per cent average for Asia.

"Pan Asia small caps outperformed larger companies by 6.1 per cent this year (as of Nov 23rd). In the region, smaller companies from India and Korea were star performers this year," according to the report. The report highlights that the relative performance of Asian small companies began improving after October 30.

Indian small-cap stocks witnessed a relative performance of 10.4 per cent in the year so far as compared to the large ones. In the fourth quarter of the calendar year 2007 so far the returns have been better by 0.5 per cent.

However, small companies had underperformed sharply in the third quarter giving returns lesser by 2.7 per cent. Citigroup analysts believe that small and mid-cap stocks have abundance of value as they had underperformed in July-October this year.

The attractiveness of small and mid-cap companies has grown as the interest rate outlook is likely to remain benign for most regional economies, with the exception of China, the report says. The key catalyst for share price performance remains a stable liquidity environment, it adds.

Sector-wise, infrastructure and commodities performed best on a 12-month basis among the small and mid caps that Citigroup Research covered among the nine markets in the Asia Pacific.

However, the market has turned negative on tech stocks. According to Citigroup's estimates, commodities, property and tech show decelerating earnings growth. "Meanwhile, we expect earnings growth momentum for infrastructure and consumer to accelerate," the report says.