The worst of the market correction may already be behind investors, with small-cap stocks poised to lead the next phase of the rally, according to Manav Chopra, Executive Director, Nuvama Institutional Equities. Speaking to NDTV Profit, Chopra argued that Indian equities are emerging from what he describes as a “transition phase” rather than entering a prolonged bear market.
He pointed to improving market breadth, strengthening banking stocks and easing macroeconomic concerns as signs that a fresh bull run is taking shape. “We have already formed a very strong low in April,” Chopra said. “More or less, the worst of 2026 is behind us.”
According to him, market history suggests that bull markets are often followed by six to seven quarters of consolidation before the next leg higher begins. The current cycle appears to fit that pattern, with the market now entering its seventh quarter of consolidation after the strong rally seen between 2020 and 2024.
Broader Market Sending Strong Signals
Unlike previous rallies that were driven largely by a handful of heavyweight stocks, Chopra believes the current setup is being supported by healthier market breadth. He pointed to the strong performance of small-cap and mid-cap stocks during April and May, arguing that broader participation is a prerequisite for any sustainable bull market.
“No bull market starts unless the broader market starts participating,” he said.
One of the key indicators Chopra tracks is the performance of the Nifty 500 relative to the Nifty 50. According to him, the broader market has already begun outperforming benchmark indices, a pattern that historically precedes stronger market advances.
He also highlighted a breakout in the Nifty Next 50 index, which he sees as another sign that leadership is expanding beyond the largest stocks.
ALSO READ: Nifty Up 1.6%, Sensex Rises Over 1,000 Points: Three Reasons Why Market Is Rallying
BFSI Seen As Key Catalyst
Private banks, which have lagged the market for several years amid persistent foreign institutional investor selling, may be nearing the end of their underperformance cycle, he said. “BFSI accounts for nearly 38% of the Nifty. A sustained market move cannot happen without support from financials,” Chopra noted.
He sees particular opportunities in mid-sized private banks, including names such as Bandhan Bank, RBL Bank and Federal Bank, arguing that these stocks could outperform larger peers if sentiment towards the sector improves.
Other Sectoral Picks
He also identified tyre manufacturers as one of the most attractive themes for the next six to 12 months, citing easing raw material pressures and favourable technical setups.
Infrastructure and capital expenditure-linked stocks also remain among his preferred bets, particularly power-related companies and engineering plays that have emerged from multi-year consolidation phases.
Shipping and shipbuilding companies are another area of interest, with Chopra arguing that ownership levels remain relatively low despite improving fundamentals.
For investors looking for the market's next “dark horse,” however, Chopra's answer was small-caps. He believes the ratio of small-cap stocks to the broader market has broken out of a five-year consolidation pattern, setting the stage for what could be another year of outperformance from the broader end of the market.
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