Stock Market Today: Smallcap, Midcap Shares Outperform Sensex, Nifty; Here’s Why
On Wednesday, Sensex and Nifty were marginally higher, but the broader market showed strong strength, with three out of four stocks on BSE trading in the green. Smallcap and midcap indices rose up to 2%, as investors viewed the recent selloff in these stocks as excessive. This trend was evident in stocks from sectors like railways and defence, which saw gains.
- Market Performance: By 9:53 am, the BSE Sensex was at 75,987.22, up 0.03%, while Nifty rose 0.08% to 22,964.25. The BSE Smallcap index surged 2.14%, and the BSE Midcap index gained 1.25%.
Q3FY25 Earnings and Valuation Concerns
The Q3FY25 results for mid and small-cap companies showed more downgrades compared to large-cap companies, as many faced top-line and margin pressures.
- Earnings Impact: According to Rahul Singh (CIO-Equities at Tata Asset Management), mid and small caps are still trading at a premium of 57% and 30% respectively over large caps. With earnings downgrades, maintaining these valuations will be challenging, even for sectors like IT and pharma.
Top Performers in Large, Mid, and Small Caps
- Large-cap Gainers: Stocks like Zomato (up 1.68%) and Tata Steel, IndusInd Bank, Axis Bank, SBI, and Kotak Mahindra Bank (gaining up to 1.23%) led the large-cap segment.
- Mid-cap Leaders: RVNL surged 8.63%, while other mid-cap stocks like Mazagon Dock Shipbuilders, Bharat Dynamics, and Suzlon Energy advanced 5-8%.
- Small-cap Winners: Tata Investment, Data Patterns, GRSE, Swan Energy, Minda Corp, and Anant Raji saw gains ranging from 6-14%.
Challenges for Indian Market and FII Trends
Despite strong gains in small and mid-caps, India’s market has underperformed compared to the US indices, like the S&P 500 and Nasdaq, which are at new highs. Concerns also include Chinese stocks, which are trading at attractive valuations, potentially pulling in foreign portfolio investments (FPIs).
- FII Activity: V K Vijayakumar (Geojit Financial Services) believes FIIs will return to India once the dollar weakens and US bond yields decline, which may take time. A recovery in earnings by early FY2026 is expected to be a key factor in turning FIIs into buyers.
Market Outlook and Expectations
- Volatility Ahead: Emkay Global expects continued volatility in the stock market through the March quarter. However, they anticipate a stabilization from the June quarter, as concerns about Trump tariffs ease, earnings downgrades are mostly done, and discretionary consumption demand shows signs of recovery.
- Nifty Target: Emkay maintains a Dec-25 Nifty target of 25,000, with a compelling buy opportunity at 22,500, offering an 11% upside. They suggest focusing on discretionary consumption, healthcare, and telecom, while being underweight (UW) on financials, materials, and staples.
The smallcap and midcap sectors are showing resilience despite challenges in the broader market. However, valuation concerns and earnings downgrades might limit further upside in these segments. Large-cap stocks continue to face pressure, with FIIs likely to remain cautious until more favorable conditions emerge.