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.
Unless the primary market momentum slows, smallcap stocks will stay subdued.
This marks a rebound after more than two years of underperformance during a strong rally in smallcap stocks.
'Retail portfolios were going nowhere even as headline indices moved higher, prompting investors to sell holdings and shift money to IPOs, attracted by listing-day gains.'
The BSE Smallcap index hit an over eight-month low of 47,627.96, falling 3 per cent in Tuesday's intraday trade amid selling pressure due to ongoing tariff-related concerns and rising geopolitical tensions.
Over 50 per cent, or 660 stocks, from the BSE 1000 index recorded negative returns during CY25.
Investors seeking higher returns at relatively higher risk should consider allocation to smallcap equity funds.
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.
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.
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.
Indian stock market indices Sensex and Nifty closed nearly 1 per cent higher, marking their third consecutive day of gains, supported by a slight decrease in crude oil prices and positive global market trends.
Fixed deposits from nationalised banks delivered higher returns than equities, outperforming both inflation and stock market benchmarks.
'Defence, capital goods, engineering, capital market-related stocks, autos, and cement sectors are my bullish bets for Samvat 2082.'
Indian benchmark indices Sensex and Nifty experienced declines due to a sharp rally in crude oil prices, continuous foreign fund outflows, and geopolitical uncertainties. Regulatory developments in the banking sector, particularly the implementation of the Expected Credit Loss (ECL) framework, also contributed to the selling pressure.
The BSE Sensex and the Nifty 50 declined around 4.5 per cent each since the start of the West Asia conflict.
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.
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.
Is the current rally telegraphing a durable peace plan in West Asia, boosted by United States (US) President Donald Trump's incoherent and contradictory posts on social media?
Retail investors are moving away from a buy-and-hold approach and towards more informed short-term positioning, recent investment patterns show.
The last time these two indexes recorded a negative performance on a calendar year basis was in CY19.
Indian benchmark stock indices, Sensex and Nifty, closed nearly 1 per cent lower following the collapse of US-Iran negotiations, which heightened concerns of a prolonged conflict in West Asia and drove crude oil prices sharply higher.
Worries about global politics and trade are pulling the Nifty 50 down. Experts say the market could drop further low.
'As re-industrialisation gathers pace across regions like Asia, Europe and the US, a wide range of products and inputs will see demand.'
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.
Net inflows into equity mutual fund schemes moderated in FY26, falling by 27 per cent to about 3 trillion till February, as choppy markets and global uncertainties prompted investors to shift towards safer options like hybrid funds and gold ETFs.
Investing in gold trumped most other asset classes in terms of compounded annualised returns over the long term, suggests a report by FundsIndia.
Indian investors have seen their wealth erode by a staggering Rs 48.29 lakh crore since the West Asia war began on February 28, leading to a significant downturn in the BSE Sensex and NSE Nifty, driven by geopolitical tensions and rising crude oil prices.
It has mostly been a one-way street for smallcap stocks that have taken it on their chin thus far in February. The Nifty Smallcap 250 index has shed 3.2 per cent in the current month as compared to the 1.8 per cent decline in the Nifty Midcap 100 and the 0.5 per cent drop in the Nifty 50 index, data showed. Technically, the index has slipped below its 20-day moving average (DMA) placed at 14,800 levels on Monday, and is currently testing the 50-DMA, and is placed at 14,278 levels.
Equity benchmark indices Sensex and Nifty experienced a significant decline, primarily driven by a selloff in IT stocks due to concerns about AI disruption and renewed worries over global trade.
Equity markets fell on Monday, with benchmark indices recording their worst session in over two months amid caution ahead of the US Federal Reserve's (Fed's) policy announcement and renewed uncertainty over the US-India trade deal. Sustained selling by foreign portfolio investors (FPIs) also weighed on sentiment.
'Though one cannot paint the entire microcap basket with the same brush, investors need to be careful now as to what they're buying.'
Among the Sensex shares, Infosys, Tata Motors, Axis Bank, Adani Ports, Mahindra & Mahindra, HDFC Bank, Larsen & Toubro, Tata Steel, BEL and Power Grid were among the lead gainers. Kotak Mahindra Bank, ICICI Bank, Bharti Airtel, Asian Paints, Bajaj Finserv, and Titan were the among the laggards.
The milestone crowns a record year for the domestic primary market where IPO mobilisation is set to cross Rs 1.7 trillion.
Stock markets closed higher for the second straight session on Tuesday, driven by gains in bank, IT and capital goods shares.
'Selling could further intensify and take the index towards 22,800-22,750 in the near-term.'
Market players attribute the rally in small and midcaps to flows from retail investors and domestic institutions.
While selecting a smallcap scheme, go with one that has a good track record and a stable fund manager.
Net inflows into two of the 'lower risk' equity funds - largecaps and flexicaps - outpaced the flows into smallcap funds during January 2024 for the first time in 17 months. This is an indication that investors may now be shifting to the relatively safer largecap stocks after a sharp run up in the mid and smallcap spaces. Net inflows into large and flexicap funds were at Rs 3,730 crore last month against Rs 3,260 crore by smallcap schemes.
Among major Sensex gainers Bajaj Finserv rose the most by 1.42 per cent, Axis Bank gained 0.80 per cent, Infosys by 0.72 per cent, Mahindra & Mahindra by 0.60 per cent, Tata Motors by 0.55 per cent, Bajaj Finance by 0.53 per cent and Tata Steel by 0.52 per cent. Kotak Mahindra Bank, ICICI Bank, HCL Technologies, Bharti Airtel, Maruti Suzuki India, Trent Ltd and Tata Consultancy Services were the losers.
Benchmark BSE Sensex fell 558 points on Thursday amid heavy selling in IT shares, as concerns over AI-led disruptions and waning hopes of a Fed rate cut after firm US economic data weighed on investor sentiment.
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