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.
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.
'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.'
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.
Over 50 per cent, or 660 stocks, from the BSE 1000 index recorded negative returns during CY25.
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.
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.
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.
'Defence, capital goods, engineering, capital market-related stocks, autos, and cement sectors are my bullish bets for Samvat 2082.'
Retail investors are moving away from a buy-and-hold approach and towards more informed short-term positioning, recent investment patterns show.
Worries about global politics and trade are pulling the Nifty 50 down. Experts say the market could drop further low.
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.
The last time these two indexes recorded a negative performance on a calendar year basis was in CY19.
Investing in gold trumped most other asset classes in terms of compounded annualised returns over the long term, suggests a report by FundsIndia.
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.
Stock markets closed higher for the second straight session on Tuesday, driven by gains in bank, IT and capital goods shares.
The milestone crowns a record year for the domestic primary market where IPO mobilisation is set to cross Rs 1.7 trillion.
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.
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.
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.
Market sentiment is likely to remain cautious as investors position themselves for the upcoming Union Budget and the US Fed's interest rate decision, where expectations are muted.
'The problem is not just slower growth, but also the quality of growth.'
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.
Retail investors' equity portfolios have significantly underperformed benchmark indices over the past 16 to 18 months.
'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 Sensex firms, Trent, ICICI Bank, Tech Mahindra, Bajaj Finserv, Mahindra & Mahindra, Power Grid, Tata Consultancy Services and Bajaj Finance were the major laggards. However, Tata Steel, Larsen & Toubro, State Bank of India, Kotak Mahindra Bank were among the major gainers.
Among Sensex firms, Tata Consultancy Services, Tech Mahindra, Axis Bank, Bajaj Finance, Eternal, Infosys, Kotak Mahindra Bank and Bajaj Finserv were the major gainers. However, Tata Steel, Adani Ports, Power Grid and Titan were among the laggards.
'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.
After a year of modest returns, equity investors may anticipate gains of 10-15 per cent in Samvat 2082, which began on October 21. Although valuations have moderated from their peaks a year earlier, they remain above long-term averages, potentially limiting sharp upsides.
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.
While selecting a smallcap scheme, go with one that has a good track record and a stable fund manager.
Among Sensex firms, NTPC, Axis Bank, Power Grid, Bharti Airtel, Eternal and Sun Pharma were the major gainers. However, Infosys, Titan, UltraTech Cement and Hindustan Unilever were among the laggards.
The cash pile within smallcap mutual fund (MF) schemes has grown over the past few months amid a relentless rally in stocks in this space. While fund managers usually don't make cash calls, incessant inflows and valuation discomfort have forced their hand. At the end of January, the top 10 schemes had over Rs 12,160 crore in cash, compared to Rs 8,700 crore in August 2023.
Largecap equities are less volatile than mid- and smallcap stocks, making them suitable for risk-averse investors.
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