Recently Nifty has been seen crossing 26,000 and Sensex has crossed 86,000. Both have created new all-time highs. Market headlines are celebratory. But if you check your portfolio, the story may seem very different. No joy in the portfolio, no fireworks, maybe even a little loss. This is the message the market wants to give you. When you look beyond the shine of the index’s new highs, you’ll realize that this rally is not broad based. This is a classic and historic case of big stocks quietly seizing leadership. Whereas mid-caps and small-caps are now taking a little rest after two years of rally.
Such bicycles have been seen many times in the last two decades. This pattern rarely fails. When risk appetite decreases in the market, liquidity decreases, valuations increase and uncertainty increases, money automatically moves towards safety. In the Indian equity market, “safety” has always meant the same thing and that is large cap companies with good liquidity and stable earnings.
Top 10 stocks have the biggest contribution in the market rise
In the last eight months, Nifty has gained 17.4 per cent from its April 2025 low. But about 63 percent of this gain is from the top 10 stocks only. Reliance Industries, HDFC Bank, SBI, Bharti Airtel, L&T and other big companies have done all the work, whereas, there has been hardly any movement in the small-medium stocks segment. Nifty Micro Cap 250 index is down 10 percent. At the same time, small cap is down 2509 percent. Micro cap and small cap, in which most of the retail investors’ money is invested, have not participated in this rally at all.
Meanwhile, the CNX100/CNX small cap ratio looks clearly above its long-term support trendline. If we look at the past data, this is a level from which there are often indications of the beginning of a big phase of better performance of large caps. In 2008, following this support, large caps showed relative outperformance of 80 percent. After taking support here in 2018, there was a jump of 105 percent in large cap companies. A similar situation was seen developing in the beginning of 2025, since then we have seen the performance of large caps improving.
Valuation is also giving similar signals
Mid caps are currently trading at 25 times forward earnings. This is more than their 10-year average of 23 times. Small caps are traded at 23 times, which is much higher than their long-term average of 18. These are the levels at which institutional investors hesitate to invest and retail investors get nervous. This would also be supported by the huge FPI selling of Rs 2.67 lakh crore in 2025. In such markets, money naturally searches for safety, which is in favor of large caps.
Expectation of further increase in liquidity
The new Fed Chairman is expected to accelerate the pace of rate cuts in 2026. Lower global rates mean that there will be a flood of liquidity in emerging markets. In such a situation, if money comes to India on a large scale, then perhaps it will first and foremost go into liquid stocks, which fall in the large cap category. Much later this money will reach mid and small cap companies. If we put all these things together, the picture is very clear.
Nifty trend: On the basis of good technical structure, level of 26500 is possible in Nifty soon, keep an eye on these two stocks.
Avoid the temptation to chase falling small caps
If we look at history, it is clear that we are at the beginning of an era where big companies lead the market, strengthen and stabilize the market. Then after this, small and medium companies also join the wedding celebrations as wedding guests.
In such a situation, if you are an investor then avoid the temptation of running after falling small caps. Include these quality stocks in your portfolio. Focus on market leaders.
Jimeet Modi is the CEO and Founder of SAMCO Securities.
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