Eyeing Santa Rally? Jupiter Wagon, Ola Electric, NBCC Likely Gainers Among Small Cap Stars

Small-cap stocks are once again taking the lead as the Indian stock market heads into the year-end, with historical trends pointing towards a strong Santa Claus Rally for the segment. Data shows that small caps have consistently outperformed mid-caps and large caps during this seasonal period, reinforcing investor optimism as the calendar turns.

The Santa Claus Rally typically refers to the last five trading sessions of December and the first two sessions of January. Over this window, small caps have delivered a remarkable 100%-win rate, making them the most consistent performers among market segments.

Over the past decade, small caps have posted an average return of 3.55% during the Santa Rally period, comfortably ahead of mid caps at 2.63% and large caps at 1.78%, according to SAMCO.

The strongest year for small caps during this phase was 2022, when the index surged 7.23%, underlining the segment’s ability to generate outsized returns in favourable conditions.

Several factors explain why small caps tend to shine during this period. Tax-planning flows play a key role, as investors rebalance portfolios before the financial year-end, often rotating into higher-growth opportunities.

Sentiment also tends to reset towards the end of the year, with fresh positioning for the new calendar year driving renewed risk appetite.

This is complemented by broader risk-on tendencies, as lower liquidity and positive seasonal bias amplify moves in relatively under-owned and higher-beta stocks such as small-caps.

Early signs suggest that the Santa Rally may already be warming up in the small cap space. Over the last two trading sessions, several small-cap stocks have posted sharp gains.

Jupiter Wagons has rallied 18%, while Ola Electric is up 9%. Garden Reach Shipbuilders & Engineers, RR Kabel and NBCC have each gained around 8%, reflecting improving sentiment and aggressive buying interest in select names.

Looking beyond the near-term rally, analysts continue to see meaningful upside potential in select small-cap stocks over the medium term. Bloomberg data shows that among stocks tracked by at least five analysts, Saregama offers the highest return potential of around 60% for 2026.

Aditya Birla Real Estate follows with a potential upside of 54%, while ACME Solar Holdings and Deepak Fertilisers both carry return potential of about 53%. Techno Electric Engineering is also on the radar, with analysts projecting upside of nearly 52%.

With seasonal tailwinds, improving sentiment and selective stock-specific opportunities, small-caps appear well-positioned to remain in focus as markets head into the new year.