Indian equities have staged a sharp recovery from the March 2023 lows, with benchmark Nifty 50 rallying by over 7 per cent as of last week. While the Adani-Hindenburg issue led to the massive fall in the market between the January-March 2023 period, when the Nifty corrected by over 13 per cent, FII buying in April and early May 2023, helped the recovery. That said, the recovery is only partial, and the bellwether index is still about 4 per cent below its life high of 18900 levels.  

But, have small and midcaps really participated in this rally, or have only large caps driven it? How does this one compare to the earlier recovery in 2020-21, post covid? Read on to know what our analysis of Nifty 50, Nifty Midcap 100 and Nifty Small cap Index and its constituents reveals.

While Nifty 50 has returned 7.3 per cent gains from the March 2023 lows, NSE Midcap 100 Index has risen by 10.8 per cent over this period, while NSE Small Cap 250 has gained 11.6 per cent.

About 29 of the Nifty 50 stocks have delivered index-beating returns, which is 58 per cent of the total stocks. And 46 of the 50 stocks have managed to deliver positive returns during this period, which is about 92 per cent. About 22 of them handed out double digit gains to their investors during this period, which accounts for 44 per cent of the Index stocks.

But the story with midcap and small cap stocks is slightly different.

Of the 100 stocks that constitute the Nifty Midcap 100 Index, 52 of them have managed to beat the index returns, while the balance have failed to keep pace with the index returns which translates into 52 per cent. This is lower than the 58 per cent for Nifty 50. Godrej Properties with a 32 per cent gain tops the list. Other key gainers include AU Small Finance Bank (30.5 per cent), Sona BLW (29.7 per cent), Trident India (29.7 per cent), Mahindra and Mahindra Financial Services (29 per cent), Astral India (28.9 per cent) and IRFC (28 per cent) among others.

Midcap stocks that have massively underperformed the index include Crompton Greaves (13.5 per cent fall), IPCA Laboratories (12.5 per cent), Zee (11.6 per cent) and Aditya Birla Fashion (8 per cent decline) among others.

While 9 of the 100 stocks, have seen their price fall further during the March-May 2023 period., about 54 of them accounting for equivalent percentage of the index have managed to deliver positive returns. This is higher than the 44 per cent for the Nifty 50.

The trend is quite similar with small caps too.  About half the stocks have outpaced the index returns. Of the 250 stocks that are part of the Nifty Small Cap 250, 129 stocks have delivered returns in-line or higher than the Index. Topping the list of outperformers is the stock of Rail Vikas Nigam Limited gaining a massive 88 per cent over the last two months. Cholamandalam Finance (51.9 per cent), FACT (50.7 per cent), GSFC (47.8 per cent), Glenmark Pharma (43 per cent) and Welspun India (41.9 per cent) are the other prominent gainers.  

30 stocks have seen their price fall further during this period, which is about 12 per cent of the constituents. Stocks that figure in the bottom of the ranking table include Archean Chemicals (17.2 per cent), Orient Electric (16.7 per cent) and Brightcom Group (13.3 per cent). 144 stocks have delivered double digit returns, which accounts for about 58 per cent of the total stocks constituting the index. This is higher than the 54 per cent and 44 per cent for Nifty Midcap 100 and Nifty 50.

On an average return basis also, the simple average (equal weighted performance) of Nifty 50 stock return was 8.7 per cent, while Nifty Midcap 100 was 11 per cent and Nifty Small Cap 250 was 12.7 per cent.

How does this rally compare with the post covid one?

Interestingly, during the March 2020-October 2021 rally, mid and small caps outperformed their large cap counterparts. While large cap stocks measured by Nifty 50 returned 143 per cent, Nifty Midcap 100 rose by 180 per cent and Nifty Small cap 250 Index gained a massive 228 per cent. Should one conclude that the outperformance is not as significant as the last time? While it is a fact that the absolute number of mid cap and small cap index stocks that have managed to beat their index return is still lower than that of large caps, it may be too early to conclude. In terms of stocks delivering double digit returns, small and midcap indices are ahead of their large cap peers.

That said, whether large cap rally past their November 2022 highs and midcap and small cap outdo their 2020-21 performance, remains to be seen. However, the key thing to note for now is that the recent rally is not entirely narrow/driven by large caps, and has seen some broader market participation as well.