Market Volativity Hits Mid and Small-Caps: Are Large-Cap Stocks A Safer Bet Now?

The recent valati in the Indian stock market has taken a tally on mid- and small-cap stocks, as investors grow increasingly caumen amid global uncerty and elevated valuations, PROMPING THEME TESIS Segments in search of safer bets in large-cap stocks, which are often percented as more staff during turbulent phases.

Global markets have been on edge this week, with the latest escalation between ran and israel adding fresh strain to an already fragile Global Economy – Oone Still Grappling with the Effects of trade of trade and the ongoing Russia -rukraine war. However, the Indian Stock Market Managed to End the Week With Healthy Gains, Supported Largely By Strength in Blue-Chip Stocks.

Despite Rising Crude Oil Prisis, Prolonged Trade Tensions, and Limited Progress in Negotiations Between the US and Its Key Key Trading Partners, Indian Large-Cap Stocks Have Contined to Draw Investor Investigation.

Optimism Around Corporate Earnings – Buoyed by a Turnaround Seen in the March Quarter and Expectations of Stronger Performance in the June Quarter of 26 -Along with Relative Valuations Mid- And Small-Cap Counterparts, Has LED Investors to Shift Their Focus Toward these more Establed, higher-priced stocks.

Against this backdrop, bot the nifty 50 and sensex closed with gains of Nearly 2%, while the nifty midcap 100 and nifty smallcap 100 indices remained Under Pressure for the Second Consecuvive Woman Each declining by up to 1%.

Recent data also indicates a shift in retail investor preference toward large-cap stocks, as ownership in mid-and small-cap counters fell to a nine -Quarter low AMID AFFF DURIDER MARATE SELL-MARATE SELL-MARATER MAREKER MARATE March 2025 Quarter, According to the Nse’s Report Titled India Ownesip Tracker.

During the March Quarter, Mid- and Small-Cap Stocks underperformed their large-cap counterparts, further amplifying Valuation Concerns in these segments.

According to the latest analysis by domestic brokerage firm kotak institutional equities, small caps LED the earnings cuts, with a 6% Reduction in FY2026 EPS EPS Eps Eps Eps Eps Eps Eps Eps Eps Eps Eps Eps Eps Eps Eps Eps Eps Eps Eps Eps Eps Eps Eps Eps Eps Epsy Mid-caps.

On the Valuation Front, The Nifty Smallcap 100 is Trading at a One-Yar Forward Price-to-Earnings (P/E) Multiple of 27.2x-significly Higher Than Its Long-Term Average and Close to the nifty Midcap 100’s P/E of 28.3x.

This Sharp Rise in Valuations Places The Nifty Smallcap 100 Near Its Historical Peaks, Levels Last Seen during Previous Phaces of Overheated Sentiments, Such as Mid-2021 and PRE-2018, According to domatic brokements firm incred equities.

In contrast, the nifty 50 is trading at a more reasonable 20.7x forward p/e. The Narrowing Valuation Gap Between Small- And Mid-Cap Stocks is Making Investors Uncomfortable. Analysts believe this has prompts a shift in investor focus toward large-cap stocks.

High Valuations Could Pressure Smids in the Short Term: Experts

Looking ahead, analysts expect smal and mid-cap stocks are likely to underperform in the short term, give his elevated valuations and absence of short-term triggers.

Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, Said, “The Recent Weakness in the Broader Market is Likely to Continue Since ARECE ARECE ARECE ARECE SICESSISISISS Lead to further seling in this segment.

Disclaimer, The views and recommendations giving in this article are that of individual analysts. These do not represent the views of Mint. We Advise Investors to Check With Certified Experts Before Taking Any Investments Decisions.