SmallCap stocks were in demand on Thursday, with several counters gaining sharply and the Nifty SmallCap 100 index trading close to its all-time high, as strong domestic liquidity and better-than-expected earnings supported investor sentiment.
The Nifty SmallCap 100 index rose as much as 1.07% to 19,919.40, coming within striking distance of its all-time high of 19,936.55. At 11:08 am, the index was trading 1.03% higher at 19,910.35. In comparison, the Nifty 50 was up 0.55% at 24,211.70.
The broader market rally was fairly widespread. Of the 100 constituents in the Nifty SmallCap 100 index, 82 stocks were advancing while 18 were declining at the time of publication.
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Netweb Technologies, Sai Life Among Top Gainers
Among individual stocks, Netweb Technologies was the top gainer, rising as much as 7.5% to Rs 5,443.80. Sai Life Sciences gained up to 3.3% to Rs 1,469, while KFin Technologies advanced 2.5% to Rs 971.75.
Force Motors rose 1.74% to Rs 18,149, while Sona Comstar, Brigade Enterprises, Cohance Lifesciences, CreditAccess Grameen, Redington, HBL Engineering, Triveni Turbine, PNB Housing Finance, Anant Raj, Signature Global and IIFL Finance were among other stocks trading in the green.
Why SmallCaps Are Outperforming
The outperformance comes as domestic investors continue to support the broader market, while large-cap stocks remain relatively subdued, analysts said.
Independent analyst Ambareesh Baliga said momentum in small-caps remains intact, supported by better-than-expected earnings. He added that large-cap stocks have largely been trading sideways, prompting high-net-worth individuals (HNIs) and retail investors to shift allocations towards small-caps.
Ravi Singh, Chief Research Officer at Master Capital Services, said small-cap indices are trading close to record highs as domestic liquidity remains strong.
According to Singh, one factor supporting the divergence is the concentration of FII activity in large-cap stocks. Foreign investors typically have higher exposure to large counters, making large-caps more vulnerable to selling pressure. Small-caps, with relatively lower FII ownership, have benefited as domestic investors and DIIs continue to provide support.
He also pointed to sector rotation, with investors looking beyond relatively stretched large-cap pockets for companies offering stronger growth opportunities.
However, Singh cautioned that the rally is not uniform, with valuations remaining an important consideration. Companies with healthy order books, manageable debt and visible earnings growth are better positioned to sustain investor interest.
"The next phase of the rally will depend largely on earnings delivery and continued domestic liquidity," he said.
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