Benchmark stock indices Sensex and Nifty were trading marginally higher in Wednesday's trade but the market breadth was strong with three out of every four stocks trading on BSE in the black. Smallcap and midcap indices were trading up to 2 per cent higher, as investors judged the recent selloff in second rung stocks as excessive. Many battered names from sectors such as railways and defence gained.
Marketmen though believe valuations still remains rich in the pocket, following the disappointing earnings season, and suggested investors to stick with largecap plays. They see the market to remain volatile in the ongoing quarter.
At 9.53 am, the BSE Sensex was trading at 75,987.22, up 19.83 points or 0.03 per cent. Nifty rose 18.95 points, or 0.08 per cent, to 22,964.25. The BSE Smallcap index surged 2.14 per cent while teh BSE Midcap index was up 1.25 per cent.
The Q3FY25 results for mid and small cap companies saw more downgrades compared to large caps against the previous quarter, as majority of the companies were facing either top line and margin pressures, said Rahul Singh, CIO-Equities at Tata Asset Management.
"On the valuation front, mid and small caps are still running at a premium of 57 per cent and 30 per cent respectively against large caps. Earnings downgrades will make valuations tough to sustain in mid and small caps even in relatively good sectors like IT and pharma," Singh said.
Among largecaps, Zomato advanced 1.68 per cent to Rs 227. Tata Steel, IndusInd Bank, Axis Bank, SBI and Kotak Mahindra Bank gained up to 1.23 per cent. Among midcap names, RVNL surged 8.63 per cent. Mazagon Dock Shipbuilders, Bharat Dynamics Ltd, Cochin Shipyard Ltd, Suzlon Energy Ltd and Thermax Ltd advanced 5-8 per cent.
Smallcap stocks such as Tata Investment, Data Patterns, GRSE, Swan Energy, Minda Corp and Anant Raji advanced 6-14 per cent.
The BSE Smallcap index has plunged 19 per cent in 2025 so far. The BSE Midcap index has fallen 14 per cent during the same period.
V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services said India’s underperformance is striking, given that US indices such as S&P 500 and Nasdaq are making fresh highs. News of Chinese authorities encouraging their top businessmen to invest is another headwind for India since Chinese stocks are cheap, he said noting that Hong Kong's Hang Seng index is trading at PE of 12.6 times and may attract big inflows from FPIs.
"FIIs will start buying when the dollar depreciates and the US bond yields start coming down. This might take time. A strong fundamental factor that can turn FIIs into buyers is indication of earnings recovery in India. This is likely in early FY2026. High frequency indicators might suggest a turnaround in growth and earrings soon," Vijayakumar said.
Emkay Global expects stock markets to remain volatile through the March quarter and said sharp sell-offs could keep recurring. It sees market stabilising from the June quarter for three reasons. The first is worries around Trump tariffs could recede, as tariffs are likely to be less destructive than expected. It said earnings downgrades will be largely done and expect the Nifty FY26 EPS growth at 12-13 per cent. Also, it expects signs of a recovery in discretionary consumption demand to start becoming visible.
"We retain our Dec-25 Nifty target at 25,000, and the market becomes a compelling buy at 22,500 Nifty (11 per cent upside, 21.1x 1YF P/E). We believe that the markets will pivot to a consumption theme, with capex and industrials taking a back seat. We are OW on discretionary consumption, healthcare, and telecom, and UW on financials, materials, and staples," it said.