The Nifty Smallcap 100 index has extended gains for the third consecutive session, rising by two-third of a percent on June 4, with the combined market capitalisation of the index constituents rising by Rs 17,000 crore so far this week despite bouts of volatility.
The smallcap index ended in the green on seven out of past eight sessions, with the combined market capitalisation higher by over Rs 50,000 crore since May 23.
"Smallcap stocks have seen a sharp rally recently, driven by strong domestic flows and sentiment. However, many are now trading at a significant premium to large-cap peers, raising concerns about stretched valuations. Sustaining this momentum will largely depend on how earnings evolve in the coming quarters. Given global growth headwinds and valuation risks, a broad-based upside looks limited. That said, selective opportunities do exist where stock-specific fundamentals and long-term potential remain attractive and better aligned with reasonable valuations," said Ajit Mishra – SVP, Research, Religare Broking Ltd.
Himanshu Srivastava, Associate Director - Manager Research, Morningstar Investment Research India, said, "Despite the challenging investment environment and market volatility, the small-cap segment of the Indian stock market has displayed resilience over the last three months, outperforming broader market benchmarks. However, due to their inherent volatility, it is crucial for investors to approach small-cap investments with discipline. While the potential for significant returns is evident, the risks are also heightened in this segment."
He added, "When considering exposure to small-caps, investors should adhere to their asset allocation strategy and risk appetite, investing in line with their overall financial plan. It's important not to go overboard in this segment simply because it has performed well recently. A long-term investment horizon is key to weathering the ups and downs of the small-cap space."
Motilal Oswal Financial Services in its latest note has pointed at the broader market outperformance in 2025 and said, "The Nifty has risen 4.7% in calendar year 2025 so far. The Nifty Smallcap 100 (+8.7%) and Nifty Midcap 100 (+6.1% MoM) outperformed the Nifty 50 during the month. During the last five years, midcaps (CAGR: 34%) have notably outperformed largecaps (CAGR: 20.9%) by 175%, while smallcaps (CAGR: 34.9%) have markedly outpaced largecaps by 189%."
In an earlier report, the brokerage had however cautioned investors about the potential risks in the segment. "Smallcaps remain a barbell segment, capable of both strong rebounds and deep corrections. Earnings volatility remains high, and stock selection is critical. Investors should focus on quality names with sustainable business models, visibility, and operating leverage," it had said.
Shares of IRCON were the top gainer on Nifty Smallcap index, jumping nearly 12 percent to tise the most in 20 weeks. The stock has seen a significant surge in recent days after announcing engineering, procurement and construction (EPC) order worth Rs 1,068.3 crore from East Central Railway.
Railtel Corporation of India shares surged nearly 9 percent after the company selected Techno Electric & Engineering Company as partner to set up a 10 MW data centre in phases on RailTel’s land in Noida.
RITES and Jupiter Wagons shares soared over 7 percent and 6 percent respectively, while Garden Reach Shipbuilders & Engineers (GRSE) shares were sharply higher on the memorandum of understanding (MoU) with Norway’s Kongsberg to construct India’s first-ever polar research vessel (PRV).
International Gemmological Institute (IGIL) jumped 5 percent to hit the upper circuit. Zen Technologies, CESC and Titagarh Rail Systems shares were up over 3 percent each. Other notable smallcap stocks which made significant gains included Reliance Power, Go Digit, PVR Inox, Great Eastern Shipping Company, Nuvama, Cyient, MCX, Godrey Phillips, HFCL, Birla Soft, Hindustan Copper, Devyani International, BEML and more.
Notably, the smallcap index is currently outperforming the benchmark indices Sensex and Nifty, as well as the midcap index. The Nifty Midcap index was up 0.25 percent to hover around 57,662.10.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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