The Nifty Midcap 100 and Nifty Smallcap 100 have continued to outperform the benchmark Nifty 50 this year. On a year-to-date (YTD) basis, the Nifty Midcap 100 has gained 3.89% and the Nifty Smallcap 100 has advanced 9.48%, while the Nifty 50 has declined 7.59%.
The outperformance of the broader market reflects improving business momentum and resilient earnings expectations, reinforcing opportunities for selective stock picking beyond large-cap stocks.
According to market experts, for Q1FY27 mid-cap and small-cap companies are expected to deliver stronger earnings growth than their large-cap peers, supported by healthier operating leverage, robust business expansion and favourable long-term growth prospects.
Sunny Agrawal, Head of Fundamental Research at SBI Securities, said earnings growth in the mid-cap and small-cap segments is likely to outpace that of large-cap companies. He believes that fundamentally strong businesses with sustainable growth prospects and reasonable valuations are well positioned to outperform the benchmark indices through a bottom-up stock-selection approach.
With overall corporate earnings momentum remaining subdued, experts expect quality mid- and small-cap stocks with visible growth drivers and sound fundamentals to continue attracting investor interest and outperform the broader benchmark indices.
Mohit Gulati, CIO and Managing Partner at ITI Growth Opportunities Fund, said investors continue to favour mid- and small-cap stocks because they offer better long-term growth opportunities and a more attractive risk-reward profile than large caps. He noted that while large-cap companies face increasing pressure to deliver earnings that justify their valuations, many mid- and small-cap companies still have stronger growth potential. With corporate earnings momentum remaining subdued this quarter, Gulati expects businesses with stronger operating leverage and visible growth to continue to attract investor interest.
Technical Views
Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities, said the Nifty Midcap 100 Index has outperformed the benchmark Nifty 50 since early April, after the Nifty Midcap/Nifty ratio chart broke above a key resistance level, signalling sustained relative strength. While the outperformance continued until the end of May, both indices have largely moved in tandem since then, indicating a phase of consolidation and limited directional momentum.
From a technical perspective, Shah said the Nifty Midcap 100 continues to trade above its 20-day exponential moving average (EMA), suggesting that the broader trend remains positive. However, the Relative Strength Index (RSI) has encountered resistance near the 60 level, while the Average Directional Index (ADX) has flattened, pointing to a temporary pause in momentum. He expects the 63,100-63,200 zone to act as an immediate resistance, with a decisive breakout above this range likely to trigger the next leg of the uptrend. On the downside, the 62,350-62,300 zone, coinciding with the 20-day EMA, is expected to provide immediate support.
Commenting on the Nifty Smallcap 100 Index, Shah said it has also significantly outperformed the benchmark, as reflected in the rising Smallcap 100/Nifty ratio chart. He noted that the index has been consolidating within the 19,115-19,471 range over the past seven trading sessions. Despite the consolidation, the index continues to trade above its key moving averages, indicating that the underlying trend remains strong. The RSI has flattened around the 60 mark, suggesting a pause in momentum, but Shah believes a decisive breakout above the upper end of the current range could signal the resumption of the prevailing uptrend.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
