The broader markets are leading the rebound, with both BSE Small-cap and Mid-cap indices gaining nearly 2% on March 5, 2025. This marks the second consecutive day of recovery after an extended period of underperformance since September 2024.
At 10:00 AM on March 5, 2025, the BSE Mid-cap index was up by 1.87%, while the Small-cap index had risen 1.93%. Meanwhile, the SENSEX had gained 547.23 points (0.75%) to reach ₹73,537.16, and the NSE NIFTY was up by 179.30 points (0.81%) at ₹22,261.95. This recovery comes after February 2025 witnessed the worst monthly decline in small and mid-cap stocks since the COVID-19 crash, with the BSE Small-cap index plummeting by 14%.
Sectoral performance and top gainers
Most sectoral indices were trading higher on March 5, 2025, indicating a broad-based recovery. Among the top gainers in the BSE Mid-cap index were Coforge Limited, Adani Wilmar Limited, Persistent Systems Limited, Mphasis Limited, and Suzlon Energy Limited. Meanwhile, the BSE Small-cap index saw strong performances from Quick Heal Limited, HCL Tech Limited, India Tourism Development Corporation Limited, Gabriel India Limited, and Cigniti Technologies Limited.
This rally comes despite significant foreign institutional investor (FII) selling pressure. In February, FIIs offloaded equities worth ₹58,988 crore, contributing to the severe downturn in small and mid-cap stocks. The worst-hit sectors included capital goods (-14%), real estate (-13%), technology (-13%), media (-12%), and utilities (-12%).
Analysts urge caution despite the recovery
Despite the recent uptrend, market experts advise caution. S Naren, a veteran fund manager, has previously warned against investing heavily in small and mid-cap stocks via an SIP, stating that valuations in these segments have become stretched. Similarly, Amish Shah, Head of India Research at Bank of America Securities, has highlighted the potential for further corrections in these stocks.
Analysts predict that fair valuation multiples and earnings expectations for mid and small-cap stocks will continue to undergo adjustments. They believe that many of these stocks had become detached from reality in terms of valuations, making further corrections possible.
What's next for small and mid-cap indices?
While the recovery in small and mid-cap indices provides a much-needed respite, volatility remains a concern. Investors should remain cautious and consider diversifying their portfolios instead of making impulsive decisions. If you're planning to buy shares online, staying updated with market trends and expert insights will be key to making well-informed investment choices.
As of 12:30 PM on March 5, 2025, the BSE mid-cap index was at 39,656.42, and the BSE small-cap was at 44,328.9. As the markets stabilise, investors must balance opportunities with risks, ensuring their portfolios are well-positioned for both short-term and long-term gains.
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