Smallcaps Face Their Toughest Samvat Yet


‘Defence, capital goods, engineering, capital market-related stocks, autos, and cement sectors are my bullish bets for Samvat 2082.’

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It has been a forgettable Samvat 2081 for smallcap stocks, with the BSE Smallcap index giving a negative return for the first time in six years.

The index has slipped 3.5 per cent in the Hindu calendar year.

The Nifty 50 and BSE Sensex were up 6.2 per cent and 5.7 per cent, respectively, in Samvat 2081.

BSE Smallcap had slipped 15.5 per cent and 8.8 per cent, respectively, in Samvat 2074 and 2075.

The BSE Midcap index has given a 1 per cent return in Samvat 2081, after 41 per cent and 31 per cent returns in the past two Samvat years.

“Investor focus was mostly on large and midcaps this Samvat in the backdrop of global developments and tepid earnings growth back home,” said Gaurang Shah, head investment strategist at Geojit Financial Services.

“For smallcaps, September 2025 quarter (Q2 FY26) earnings will be crucial in reviving sentiment. That said, stock and sector-specific moves will continue if the earnings remain robust,” Shah adds.

Institutional investors — largely domestic institutional investors (DIIs) — have put Rs 4.7 trillion in equities in Samvat 2081.

DIIs include domestic mutual funds, insurance companies, banks, financial institutions and pension funds.

Foreign portfolio investors (FPIs), on the other hand, made net outflows of Rs 1.53 trillion in Indian equities in the Samvat, data shows.

According to analysts at Elara Capital, FPIs’ ownership in Indian equities remains below historical norms.

Their Nifty 50 holdings are down from around 28 per cent in December 2020 to 25 per cent in June 2025.

Nifty 500 holdings have dropped from 23 per cent to nearly 20 per cent.

‘Midcaps offer the best risk-reward dynamics to play the next beta-driven rally, while largecaps provide stability and smallcaps require a selective, bottom-up approach,’ said Bino Pathiparampil and Saharsh Kumar, analysts at Elara Capital, in a recent strategy note.

On a run

Automobiles, metals, and public sector undertaking banks have outperformed the market for the fourth straight Samvat.

In Samvat 2081, the Nifty Auto index rallied 16 per cent and Nifty PSU Bank index surged 14 per cent, while Nifty Bank index soared 12.1 per cent and Nifty Metal index by 9.4 per cent.

However, Nifty IT, Nifty FMCG and Nifty Energy index have declined 4 per cent to 14 per cent, data shows.

As many as 192 stocks that comprise the BSE 500 outperformed the index, which gained 4 per cent during Samvat 2081.

L&T Finance, Laurus Labs, Manappuram Finance, RBL Bank, Fortis Healthcare, Muthoot Finance, and One97 Communications surged 70 per cent to 83 per cent, according to data.

Shah, the Geojit executive, expects a 15 per cent return from the smallcap index on a conservative basis in Samvat 2082 if earning expectations are met.

“Defence, capital goods, engineering, capital market-related stocks, autos, and cement sectors are my bullish bets for Samvat 2082,” he said.

The key near-term trigger for markets will be demand growth in consumer categories in the festival season after rate cuts in goods and services tax and a potential US-India trade deal, according to analysts at ICICI Securities.

Corporate earnings are expected to grow at 12 per cent compound annual growth rate over FY25-27 (estimated).

‘This should ensure healthy equity returns going forward. Our one-year forward Nifty target is 27,000 (22x PE on FY27E),’ ICICI Securities said in a recent note, referring to price-to-earnings ratio.

Feature Presentation: Ashish Narsale/Rediff

Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this article to influence the opinion or behaviour of the investors/recipients.

Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.

 



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