Forget Nifty50 stocks: Smallcaps soar up to 200% in 2026.
Will the mammoth rally continue?
ETMarkets.com Synopsis Indian smallcap stocks are outperforming the Nifty 50, with some indices soaring up to 200% this year.
This rally is fueled by improving earnings, strong domestic liquidity, and renewed investor interest in bottom-up stock picking.
While some experts see continued growth potential, others caution about rising valuations and suggest large-caps may offer better value.
The sustainability of this trend hinges on earnings growth and easing geopolitical risks.
By Veer Sharma, ETMarkets.com XPeers HFCL Share Price ITI Share Price Avantel Share Price Optiemus Infracom Share Price Kavveri Defence & Wireless Technologies Share Price Last Updated: Jul 03, 2026, 12:14:00 PM IST Follow us For months, Indian equities have been telling two very different stories.
On one side, the Nifty 50 has struggled under the weight of rising crude oil prices, geopolitical uncertainty and foreign investor selling.
On the other hand, the smallcap universe has quietly emerged as the market's biggest winner, delivering outsized gains and defying the broader weakness.ADVERTISEMENT The divergence has been striking.
While the Nifty Smallcap 250 has gained 10% in 2026, the Nifty has fallen 6% over the same period.
Even the sharp March correction, when the smallcap index tumbled 8% amid the Iran conflict, surging crude oil prices and heavy foreign institutional investor outflows, has done little to dent the broader trend.The rebound has been powered by improving earnings, resilient domestic liquidity and renewed investor appetite for bottom-up stock picking.
The result has been a fresh crop of multibaggers, led by HFCL, which has surged 212% so far this year.
Aditya Infotech follows with a 139.70% year-to-date return, while Acutaas Chemicals has gained 109.25%.
Syrma SGS Technology has rallied 93.90%, and the remaining six stocks in the top 10 have delivered returns ranging between 73% and 92%.
Rajesh Kothari explainsEarnings boost The rally has been backed by earnings rather than just momentum.
Importantly, 68% of the companies either met or exceeded the brokerage's expectations.ADVERTISEMENT Domestic liquidity has also played a key role.
Systematic Investment Plan (SIP) inflows into mutual funds have remained resilient despite global uncertainty, while domestic investors have gradually returned to selective buying in the midcap and smallcap space after nearly two years of subdued performance across several pockets of the market.
Valuations attractive?
The sharp recovery has followed a meaningful correction earlier this year.
Valuations across the smallcap segment compressed significantly during the March selloff, taking earnings multiples close to one-year lows.
"For India, I do believe that price-to-book for smallcaps is pretty reasonable.
They are definitely below the median of the last five-six years and more importantly the earnings growth has picked up.
