'Midcaps and smallcaps are the 'go-to segments' for retail investors.'
Smallcap and midcap funds now account for nearly 30% of active equity MF folios, as stock-market gains revive investor appetite for high-growth segments.
Smallcap funds topped the net inflow chart for the second consecutive month, as investors poured record Rs 7,973 crore into one of the best-performing MF categories.
August 2026 witnessed a significant surge in India's primary market, with 21 mainboard initial public offerings (IPOs) raising approximately 21,000 crore, marking the highest monthly deal count of the year, even as benchmark indices experienced declines.
Fund managers advise conservative investors to cap midcap exposure at 10 to 15 per cent of their equity portfolio.
Newly listed companies Vedanta Aluminium Metal, SBI Funds Management and Manipal Health Enterprises have entered the Rs 1 trillion mcap list since March 2026.
Net SIP inflow is calculated by subtracting redemptions from gross SIP investments.
Despite trailing the benchmark Nifty 50, small and midcap (SMID) stocks appear pricey on a 12-month forward price-to-earnings (P/E) basis. The Nifty trades at roughly 21x forward earnings, compared with around 28x for both the Nifty Smallcap 100 and Nifty Midcap 100 indices.
New dematerialised (demat) account additions in India reached a six-month high in July, with 2.89 million new accounts opened, driven by a buoyant initial public offering (IPO) market and a broad-based rally in equities.
IT stocks had their worst first half fall in decades, with the Nifty IT index declining 31% in the January-June 2026 period, its biggest decline in the first six months of a calendar year since 2003.
Small- and midcap stocks have delivered their biggest monthly rally in 12 years, but rising oil prices and global tensions could make the road ahead volatile.
IT services stocks have had tough two years, with prices coming under pressure from 2025 and the sell-off extending through the first half of 2026.
Despite geopolitical tensions and FII outflows, Indian small and midcap stocks have not only recovered losses but are also outperforming largecap indices, driven by attractive valuations, domestic institutional support, and a rebound in earnings.
If India does get $100 billion a year in FDI, it would be a game-changer in every possible way. FPIs would come rushing back, AI or no AI, points out Debashis Basu.
The benchmark Sensex plummeted 813 points to a three-month low, with the Nifty settling below 23,450, as escalating tensions in West Asia drove crude oil prices above USD 100 per barrel, leading to widespread selling in IT, FMCG, financial services, and oil & gas shares.
Accenture's revised annual revenue growth forecast and weaker-than-expected fourth-quarter guidance have sent shockwaves through the Indian IT sector, causing major IT stocks and the Nifty IT index to tumble significantly.
Indian benchmark indices Sensex and Nifty closed flat, paring early gains due to renewed hostilities between the US and Iran, which unsettled investor sentiment and led to profit booking in metal, oil & gas, and telecom shares.
"When you have more liquidity than good investment opportunities, there is no reason for MFs to sell a winning trade."
Net inflows into smallcap funds surged 39 per cent M-o-M to a record Rs 7,768 crore, while midcap fund inflows rose marginally to Rs 6,192 crore.
Indian defence stocks have seen an average year-on-year gain of 67 per cent, driven by renewed interest following 'Operation Sindoor' and a broader increase in global geopolitical tensions, with the combined market capitalisation of 18 firms increasing by approximately 2.3 trillion.
Small and midcaps are leading the charge in the latest market rebound. Since November 21, when the benchmark S&P BSE Sensex and the National Stock Exchange Nifty hit their recent lows and slipped into correction territory, the Nifty Smallcap 100 index has risen by 8 per cent, while the Nifty Midcap 100 has gained 5.7 per cent. Meanwhile, the Nifty 50 index has risen by 4.7 per cent during this period.
HDFC Bank's share in active mutual fund schemes has fallen to multi-year lows, despite overall MF ownership in the bank rising, as the stock faces weak performance, soft margins, and governance concerns.
Liquidity stress in smallcap funds has fallen to its lowest level since February 2024, with the average time to liquidate 50% of portfolios dropping to 27 days in June from a peak of 44.2 days in January 2026, driven by a sharp recovery in smallcap stocks and increased trading volumes.
Foreign investors have largely been exiting one part of the market while domestic investors have been enthusiastically accumulating another, points out Debashis Basu.
Foreign brokerages have started to cut their year-end targets for the Nifty 50 index amid the ongoing West Asia conflict.
Analysts predict that the Reserve Bank of India's interest rate decision, the evolving situation in West Asia involving the US-Iran conflict, and crude oil prices will be the primary factors influencing investor sentiment in the Indian stock market this week.
Mutual funds (MFs) have significantly increased their ownership across market segments, but the midcap space stands out with comparatively higher growth. Data reveals that the number of midcap companies with over a fifth of MF ownership has doubled from nine in March 2022 to 18 by March 2025. In contrast, largecap stocks saw only a marginal rise, from three to four such companies during the same period.
Fixed deposits from nationalised banks delivered higher returns than equities, outperforming both inflation and stock market benchmarks.
New demat account additions in India reached an 11-month low in March, with only 2.15 million new accounts opened, significantly below the 12-month average. This slowdown is attributed to a sharp decline in equity markets, escalating West Asia tensions, and increased crude oil prices impacting India's economic outlook.
Indian markets on Dalal Street rallied sharply as easing tensions in the US-Iran conflict and stable oil prices boosted sentiment. Track Nifty 50 and BSE Sensex performance and key global triggers.
Most actively-managed equity mutual fund schemes outperformed their benchmarks despite volatility across domestic equity markets during the past year.
Hospital stocks have emerged as a strong theme in 2026, outperforming benchmark indices due to robust earnings growth, improved occupancy, higher average revenue per occupied bed, and aggressive expansion plans by major chains.
Ask rediffGURU and PF expert Nitin Narkhede your mutual fund and personal finance-related questions.
Retail investors are moving away from a buy-and-hold approach and towards more informed short-term positioning, recent investment patterns show.
Benchmark stock indices Sensex and Nifty closed on a flat note in a choppy session on Wednesday as gains in PSU banks and auto shares were offset by losses in IT stocks.
Net investments into equity mutual fund schemes in India remained elevated at approximately 38,440 crore in April, despite a slight dip from March's high and a 3% month-on-month decline in Systematic Investment Plan (SIP) inflows.
Investing in gold trumped most other asset classes in terms of compounded annualised returns over the long term, suggests a report by FundsIndia.
Indian equities on Dalal Street saw volatility as global market trends and fresh tariff concerns linked to Donald Trump impacted investor sentiment. Track Sensex, Nifty50 movement and key market drivers for Feb 24, 2026.
Investors now have 27 passive smallcap funds to choose from 17 index funds and 10 ETFs.
Unless the primary market momentum slows, smallcap stocks will stay subdued.
