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Informist, Thursday, May 7, 2026

 

By Eshitva Prakash

 

MUMBAI – Small-cap and mid-cap stocks are expected to continue outperforming their benchmark peers Friday, buoyed by superior March quarter earnings and persistent inflow from domestic investors. A spike in crude oil prices could hinder this rally and keep headline indices under pressure, which are seen in range Friday as investors closely track the result of US-Iran negotiations. While talks could head in either direction, most investors feel that the end of the war in West Asia is in sight in the near term. 

 

In the last 30 days, the Nifty small cap 250 index has risen 17% and the Nifty midcap 150 index has risen 13.4%. In the same period, the Nifty 50 has risen a little over 5%. On Thursday, the Nifty Midcap 150, Nifty Midcap 100, and the Nifty Midcap 50 all scaled record highs. 

 

"Market participants are factoring in that there are no new escalations to the war (in West Asia)," Rohit Srivastava, market strategist at Indiacharts, said. "While it may take some time for the two nations (US and Iran) to reach a peace deal, at least talks are underway...and it seems unlikely that the US will resume large strikes such as those disrupted supply chains (previously)," he said. For his worst-case scenario, the analyst has factored in Brent crude prices at $130 per barrel, which he expects will bulldoze the Nifty 50 back to the 23100 mark, a 5% drop from Thursday's close. However, it is more likely that a peace deal between US and Iran will be reached in the near term and consequently, the Nifty 50 may enter record high territory in around three months after a peace deal, Srivastava said.

 

Overnight, US President Donald Trump said a deal with Iran was not finalised. He said it was "perhaps, a big assumption" that Iran would accept the proposal. The president threatened to resume military strikes if Iran did not comply. An Iranian foreign ministry spokesperson on Wednesday said Iran was evaluating a US proposal for a resolution, CNBC reported. At 1553 IST, the July futures contract of Brent Crude oil hovered around $99 per barrel, down over 2% on the Intercontinental Exchange.

 

Some technical analysts said small and midcap players in the market have outperformed their benchmark peers consistently in April and so far in May. This is largely because earnings of such companies have been better than Nifty 50 constituents in the March quarter, Srivastava said. This outperformance, he said, is not new for small and midcap companies, which have been growing faster than their peers for a couple of quarters. "This (small and mid-cap stocks) rally still has steam left in it and technical indicators are quite positive," Rupak De, senior technical analyst at LKP Securities, said. Persistent selling by foreign investors hit benchmark indices the most, as these traders have larger exposure to Nifty 50 stocks, while stable inflows from domestic mutual funds and investors in small and midcap stocks is another reason for this rally. 

 

"Pharmaceutical stocks are no longer just defensive bets...technical charts suggest that the (Nifty) Pharma index has broken out of a 16-month-long consolidation," De said. Brokerage Nomura said that Sun Pharmaceutical's acquisition of Organon was at a cost lower than earlier media reports and therefore, at a more comfortable leverage, which had a positive ripple effect across the sector. So far this week, the Nifty Pharma index has risen nearly 4% and in a 30-day period, it has risen over 10%. 

 

Srivastava is bullish on metal companies, sugar, and select food processing companies, while information technology stocks look risky. Fast-moving consumer goods stocks have given some indications of recovery, but current returns are not enough to justify bullish bets. De sees automobile stocks as a safe bet in a volatile market owing to strong March quarter results and record volumes in April. Information technology stocks are expected to be sluggish for a couple of months, De said.

 

Investors will focus on March quarter earnings of Nifty 50 companies such as State Bank of India, Titan Co., and Tata Consumer Products. State Bank of India is expected to report a steady growth in net profit for the March quarter owing to stable margins and healthy credit growth, although treasury-related pressures are likely to weigh on the bottom line sequentially. Growth in domestic jewellery sales in India and abroad and a double-digit year-on-year rise in sales of watches and eyewear are likely to help Titan Co. to report strong earnings for the December quarter. Healthy volume growth across its domestic foods portfolio and price-led growth overseas are expected to lead Tata Consumer Products to maintain its growth momentum in the March quarter, in line with the previous quarters.  

 

On Thursday, the Nifty 50 ended flat against Wednesday's close at 24326.65 points. In the short term, the Nifty 50's trend will likely be strong, De said. He expects the index to face resistance at 24750–24800 levels and find support at 24200 points.  End

 

US$1 = INR 94.25

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Avishek Dutta

 

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