Small, midcap stocks fall up to 11% while Nifty, Sensex hit lifetime highs: Here are the top losers

Broader markets

The shares of several smallcap and midcap companies dropped in trade on November 27. This comes even as benchmark indices Sensex and Nifty hit fresh lifetime highs after 14 months.

The Nifty Smallcap 100 index closed 0.53 percent lower at 17,876.80, snapping a two-session gaining streak. The Nifty Midcap 100 index however erased all intraday losses to close in the green with marginal gains at 61,113.15.

Analysts have commented on why they feel the broader markets are losing steam while benchmark indices scale new records, and what lies ahead.

Why smallcap stocks may see further consolidation?

Analysts have collectively estimated that volatility is still expected in the near term for the smallcap space. They have listed out various reasons why these stocks have under-performed in recent times.

According to Abhinav Tiwari, Research Analyst at Bonanza, Smallcaps have underperformed because valuations are high while earnings growth has slowed. Citing data from the recent Q2 FY26 earnings season, Charmi Shah, Business Head at Wealth1, said that nearly 32 percent of smallcap companies missed earnings expectations. This is notably higher when compared to midcap misses at 27 percent and largecap misses at 26 percent.

Tiwari noted that the sharp fall in smallcap companies also came as investors are shifting towards largecaps, which are safer bets amid global uncertainty. "FIIs have also cut exposure, adding pressure," he said. As large-cap names attract safe-haven flows, smaller firms, which are more sensitive to liquidity and macro shock, are bearing the brunt, said Siddharth Maurya, Founder & Managing Director at Vibhavangal Anukulakara.

The recent fall in smallcap stocks was also driven by lack of liquidity, according to analysts. Shah from Wealth1 explained that the boom in the primary markets and a large number of new IPOs have constrained investor funds and increased selling pressure on existing smallcap stocks.

"Technicals suggest that the Nifty Smallcap 100 is in a consolidation phase. The index needs a decisive upside breach of resistance zones to resume the uptrend. In the next leg of rally, quality small- and mid-cap names with steady cash flows and low leverage would outshine," said Maurya.

Top losers on Smallcap index:

Whirlpool shares dropped more than 11.5 percent to emerge as the top loser on the Nifty Smallcap 100 index. This comes after nearly 11.8 percent stake changed hands in a large block deal. According to reports, the company's promoters are the likely sellers.

Natco Pharma shares followed, dropping around 5 percent. Kaynes Tech and Radico Khaitan shares fell nearly 4 percent each, while PG Electroplast and Anant Raj shares fell more than 3 percent.

Cholamandalam Financial Holdings, Amber Enterprises, FirstCry and few other stocks fell nearly 3 percent each.

What lies ahead for midcap stocks?

The Nifty Midcap 100 index hit a fresh record high of 61,229.80 earlier during the day. Analysts remain fairly optimistic about the space.

There is potential for further upside in Indian midcap stocks, said Charmi Shah, Business Head, Wealth1. She added that the index scaled new record high earlier during the day, driven by strong earnings growth outpacing Nifty 50 projections of 3-8% and steady retail inflows. "I expect more gains amid interest-rate cut prospects and bullish momentum from cup-and-handle breakouts on weekly charts," she added.

Midcap stocks still have scope to rise as earnings momentum, domestic liquidity, and sectoral leadership remain supportive, said Siddharth Maurya, Founder & Managing Director, Vibhavangal Anukulakara. He added that the recent high says more about strength than excess.

However, Maurya still advised investors to be selective as valuations are no longer cheap.

"Midcaps remain suitable for quick-profit trades with a strict stop-loss, while selective stock picking and profit booking is advisable as the index nears its breakout target," said Kunal Kamble, Senior Technical Research Analyst at Bonanza.

Charmi Shah also advised caution due to stretched valuations. "Midcap stocks currently trade at approximately 25.79 times one-year forward earnings, well above their 10-year average of 23.31 times. Additionally, despite the benchmark rally, many midcap stocks have struggled individually, reflecting a divergence between headline index levels and broader market breadth. Outflows from diversified equity funds into safer assets also pose risks in the near term," she said.

"I suggest adopting a staggered investment approach over the next three to six months, with a longer investment horizon of 4-5 years to weather potential market swings. While midcaps remain preferred for their growth potential and alpha-generating ability in niche sectors, investors should be selective and focus on companies with strong fundamentals and sectoral tailwinds," she added.

Top losers on Midcap index:

Motilal Oswal Financial Services and Indian Bank shares were the top losers on the Nifty Midcap 100 index, falling around 4 percent and more than 3 percent respectively. Bank of India, Fortis Healthcare, Hitachi Energy India and Oil India followed, dropping around 2 percent each.

Supreme Industries, Union Bank of India, Alkem Labs, Swiggy, Polycab India, Waaree Energies and Marico meanwhile fell more than 1 percent each.

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