Strong quarterly earnings have bolstered small-cap and mid-cap stocks in India, with indices reaching new peaks while large-cap benchmarks remain below previous highs, signalling a potential continued rally driven by solid fundamentals.
India’s small-cap and mid-cap stocks may still have room to run, with a stronger-than-expected earnings season helping to underpin the broader market even as large-cap benchmarks remain below earlier peaks. Speaking on Business Today, Pankaj Pandey, research head at ICICI Direct, said first-quarter results showed earnings growth of more than 30% in mid-cap and small-cap companies, a pace that has helped sustain momentum outside the country’s biggest stocks.
Pandey said the latest reporting season has generally exceeded early expectations across market segments. He added that large-cap companies have also delivered solid numbers, with Nifty earnings growth ultimately coming in better than the 5% to 8% range many had anticipated. He said turnover growth was about 19% and bottom-line growth was close to 13%, suggesting that corporate performance has been firmer than investors initially feared.
That strength is showing up in market leadership. According to Pandey, investors have been shifting towards smaller companies, not simply on the basis of sentiment but because the numbers have improved. Nifty is still about 7% below its previous high, while mid-cap and small-cap indices have already touched fresh peaks, reinforcing the view that the rally in broader markets has been supported by fundamentals as much as by risk appetite.
The gains have not been confined to a handful of names. Pandey pointed to strong quarterly results in electronic manufacturing services, consumer durables, capital goods and power equipment, sectors closely tied to domestic growth themes such as manufacturing, consumption and infrastructure spending. That pattern has echoed broader market commentary in recent weeks, with analysts warning that rich valuations could still limit upside if earnings momentum slows. For now, however, the latest results suggest the broader market’s premium is being tested by profit growth rather than undermined by it.
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