Sensex, Nifty take a hit, but 5 reasons why smallcaps, midcaps remain bulletproof

Time of India

5 hours ago

1. Stock-Specific is the New Market Mood
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2. Earnings Optimism
3. No FII, No Fear
4. A Tsunami of Domestic Liquidity
5. War Overhang May Be Short-lived
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While the Sensex tanked over 900 points and the Nifty slid below the psychological 25,000 mark in Monday's trade, it felt like just another calm day in paradise for smallcap and midcap investors. The bombs may be flying over the Middle East, but in Dalal Street's broader market, it's stock-specific sunshine.In a day marked by escalating geopolitical drama, following the US strike on Iran's nuclear facilities, retail portfolios hardly flinched. In fact, many smiled.The BSE Smallcap index defied gravity, rising 0.3% as stocks like Ideaforge, Apollo Micro Systems and Northern Arc Capital surged over 10%. The Nifty Midcap 100 also climbed 0.34%, even as the frontline Nifty 500 closed 0.26% lower.So what's insulating the small and mid-tier soldiers of the market when the generals are bleeding?'The market structure has changed over the last 2-3 months,' said Sunny Agrawal, Head of Fundamental Research at SBI Securities. 'It's become stock-specific. Investors are laser-focused on earnings growth potential or fundamental shifts in business. In some cases, industry tailwinds like in defence, are driving action.'Also Read | Rs 1 lakh crore FII selloff in 6 sectors! Are you still holding the wrong stocks? According to Agarwal, several midcap and smallcap names are poised to deliver a 25-30% CAGR in earnings over the next two years. Agarwal remains bullish on NBFCs and consumption-driven themes, which are more dependent on India's domestic story than oil flows through Hormuz.Foreign Institutional Investors (FIIs) have largely stayed away from the midcap and smallcap space. The result? No selling pressure. In a war-induced panic selloff, that's the moat retail and HNIs are enjoying.It's not just retail. Family offices and domestic institutions are increasingly parking money in the broader market. "Family office pools are growing stronger, and midcaps/smallcaps are no longer just HNIs and retail investors," said Agarwal. "MF inflows are healthy too and going into better-quality names."Also Read | Why stock market is falling today? Key factors behind 900-point Sensex crash, Nifty below 24,850 Dr V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services , doesn't expect a prolonged selloff. 'Even though the US bombing of Iran's nuclear facilities has worsened the West Asia crisis, market reaction remains measured. Crude prices, US futures, and the absence of panic in Asian markets indicate restraint,' he said.'The closure of the Hormuz Strait, while always a threat, has never actually happened. Any serious escalation will hurt Iran and its ally China more than the US.'The market construct, he added, continues to support a 'buy on dips' strategy.Despite the geopolitical turbulence, both experts maintain their constructive outlook. Agarwal expects "the war overhang will get 2-3 days over" and remains bullish on NBFC and consumption themes. "The market is a buy on dip structure," he emphasised.Vijayakumar echoed this sentiment: "The market construct continues to favour a 'buy on dips' strategy," suggesting that long-term investors view current volatility as an opportunity rather than a systemic threat.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)