Small, midcap indices rise up to 3% in two days: Return of risk-on sentiment post-India-US trade deal among 3 key reasons

Broader markets rise

• Nifty Smallcap 100 and Midcap 100 indices rose for the second straight session
• US-India trade deal and renewed FII inflows boosted market sentiment
• Swiggy, Amber Enterprises, and Torrent Power were among top gainers

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The shares of smallcap and midcap companies gained in trade on February 10, pushing the broader market indices into the green for the second consecutive session.

The Nifty Smallcap 100 index rose more than 0.7 percent to 17,508.85 on Tuesday. The index has now risen over 3 percent in two sessions. The Nifty Midcap 100 index gained around 0.5 percent to 60,727.85, rising more than 2 percent this week so far.

Here are some key factors leading to the recent uptrend in the broader markets:

Return of risk-on sentiment:

After several sessions of underperformance, Indian stock markets are rising amid the return of the risk-on sentiment. That is why, equities are outperforming safe-haven assets like gold and silver. “Market sentiment stayed risk-on, supported by encouraging signals from the trade deal and renewed FII inflows, even as investors tracked developments from the ongoing earnings season,” said Bajaj Broking.

The sentiment was uplifted after the India and US announced updates regarding their much-awaited trade deal. The bilateral trade deal effectively reduces US tariffs on Indian exports to 18 percent from 50 percent.

"Out of friendship and respect for Prime Minister Modi and, as per his request, effective immediately, we agreed to a Trade Deal between the United States and India, whereby the United States will charge a reduced Reciprocal Tariff, lowering it from 25 percent to 18 percent," Trump wrote in a post on Truth Social after a telephonic conversation with Prime Minister Narendra Modi.

With the US trade deal now concluded, a prolonged source of uncertainty for markets is finally behind us, said N. Arunagiri, CEO, TrustLine Holdings. “That overhang had weighed on sentiment and risk appetite for an extended period, and its resolution provides an important near-term relief. However, what matters more for markets from here is what comes after the deal,” the analyst said.

Rupee's long-overdue retracement and expected meaningful earnings recovery in FY27, along with structural reforms create a strong and supportive backdrop for markets, said Arunagiri. “From this perspective, the medium-term setup looks increasingly constructive, and we believe these are very positive times for the markets especially for broader small and midcaps,” the analyst added.

FII buying:

Foreign investors remained net buyers on February 9, purchasing net equities worth Rs 2,254.64 crore on Monday. This comes after prolonged FII selling which was seen earlier and kept markets under pressure for the entire 2025.

Between January 28 and February 6, foreign institutional investors were net buyers in six sessions, while remaining marginal sellers in three sessions. "An important factor that changed the market sentiment was the appreciation in rupee from a record low...to the dollar...This has the potential to trigger more FII inflows into India. However, a lot will depend on how the AI trade pans out," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

Value-buying:

The sharp rise in broader markets may have also been driven by value-buying after months of underperformance. The Nifty Smallcap 100 index has fallen around 4 percent in the past three months, while the Nifty Midcap 100 index rose around 1 percent.

At the same time, benchmark indices Sensex and Nifty 50 gained around 2 percent during the same period.

Top smallcap and midcap gainers today:

Swiggy shares gained around 5 percent to emerge as the top gainer on the midcap index, while Torrent Power and Bombay Stock Exchange (BSE) shares were trading nearly 4 percent higher, as seen at 11.34 am. Tata Communications, Tata Tech and Tata Elxsi shares rose more than 2 percent each, while HDFC AMC, IRCTC and MRF shares gained nearly 2 percent each.

On the smallcap index, Amber Enterprises shares rose more than 6 percent, while Kfin Technologies, The Great Eastern Shipping Company and Brainbees Solutions (FirstCry) shares rose more than 3 percent each.

Devyani International, Anant Raj and Bandhan Bank shares rose around 3 percent each, while IRCON and Angel One shares gained more than 2 percent each. Delhivery, Redington, CDSL and other shares gained around 2 percent each.

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