Mid- and Small-Cap Indices End 2025 on a Stronger Note Than Benchmarks
Mid- and small-cap stocks outperformed frontline indices in the final trading session of calendar year 2025, as broad-based buying lifted investor sentiment and helped these segments snap recent losing streaks. The rally came alongside a rebound in benchmark indices, but gains were more pronounced in the broader market, reflecting selective risk-taking by investors at year-end.
The Nifty Midcap 100 index rose up to 1 percent, breaking a four-session decline during which it had shed nearly 1.5 percent. Similarly, the Nifty Smallcap 100 index recovered up to 1 percent, erasing losses from the previous three sessions. The move underscored renewed interest in mid- and small-cap names after a period of consolidation and volatility.
Market participants attributed the rebound to value buying, policy-driven triggers in select sectors, and optimism around positioning ahead of the new calendar year.
Steel Stocks and Energy Names Drive Midcap Gains
The midcap rally was led by Steel Authority of India (SAIL), which surged over 5 percent after the government announced a three-year safeguard duty of up to 12 percent on select steel imports. The policy move boosted expectations of better pricing support and reduced import pressure for domestic steelmakers, lifting sentiment across metal stocks.
Energy stocks also featured prominently among the top gainers. Hindustan Petroleum Corporation (HPCL) advanced about 4.6 percent, while Oil India gained nearly 4 percent around noon. Traders said the buying reflected expectations of stable refining margins and selective value buying in PSU energy names after recent underperformance.
Other notable midcap gainers included:
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Godfrey Phillips India, supported by steady consumption trends
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Coromandel International, aided by fertilizer demand optimism
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Indian Bank, as PSU banking stocks remained in focus
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Indian Renewable Energy Development Agency (IREDA), reflecting continued interest in clean energy financing
These stocks rose up to 3 percent, contributing to the broader strength in the midcap space.
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Small-Cap Segment Sees Sharp Bounce, PCBL Chemical Leads
The Nifty Smallcap 100 index also staged a meaningful recovery, snapping a three-day losing streak and reclaiming ground lost earlier in the week. The rebound was led by PCBL Chemical, which jumped about 7 percent, emerging as the top gainer in the small-cap universe.
Other small-cap stocks that saw strong buying interest included:
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IFCI, which rose on expectations of balance-sheet improvement
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Deepak Fertilisers and Petrochemicals Corporation, supported by sector-specific demand trends
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Mangalore Refinery and Petrochemicals, benefiting from energy sector optimism
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NCC, which advanced on infrastructure order-related expectations
These stocks gained up to 6 percent, highlighting renewed risk appetite in select small-cap names after recent volatility.
Expert View: Sustainability of the Rebound Remains Key
Market experts cautioned that while the rebound is encouraging, its durability will be crucial, particularly in the small-cap segment, which has seen several short-lived recoveries in recent months.
Ajit Mishra, Senior Vice President – Research at Religare Broking, said, “This is the continuation of the rebound which we have been seeing in recent weeks. However, sustainability would be key, as similar rebounds have fizzled out in the past, especially in the small-cap space.”
He added that investors should remain selective and focus on fundamentally strong companies rather than chasing momentum in lower-quality names.
Broader Market Strength Supports Mid- and Small-Cap Outperformance
The broader market’s outperformance came alongside a rebound in benchmark indices. The Sensex climbed 384.45 points, or 0.45 percent, to 85,059.53, while the Nifty 50 rose 139.20 points, or 0.54 percent, to 26,078.05 around noon, snapping multi-session losing streaks.
Buying interest was largely driven by metal stocks following the safeguard duty announcement, as well as value buying after recent declines. While benchmarks recovered, mid- and small-cap stocks delivered sharper percentage gains, reflecting higher beta participation during the rebound.
Market breadth also improved, indicating broader participation beyond a handful of index heavyweights.
What Is Driving Investor Interest in Broader Markets?
Several factors supported the outperformance of mid- and small-cap stocks in the session:
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Policy triggers, such as the safeguard duty on steel imports, which lifted specific sectors
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Value buying, after recent corrections in broader market stocks
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Year-end positioning, as investors adjusted portfolios ahead of 2026
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Improved sentiment, aided by stability in benchmarks and select global cues
Traders said that while liquidity remains thinner toward the year-end, selective buying can still lead to sharp moves in mid- and small-cap stocks due to lower float and higher volatility.
Investor Takeaway: Selective Opportunities Amid Cautious Optimism
The year-end rally in mid- and small-cap indices highlights the return of selective risk appetite, even as investors remain cautious about sustainability. Policy support in sectors like metals and continued interest in energy, banking, and infrastructure stocks have provided near-term tailwinds.
However, analysts advise investors to balance optimism with caution. While the rebound has helped broader indices outperform benchmarks in the final session of 2025, stock-specific fundamentals and earnings visibility will be key drivers going into 2026.
As one market participant summed it up, “The bounce is real, but conviction will only return if earnings and policy support align in the new year.”
