Nifty, Sensex Hit Record Highs — So Why Are Many Retail Investors Still Losing Out?

Retail Investors Struggle to Profit Even as Nifty and Sensex Scale New Highs

India’s benchmark indices may be celebrating fresh highs, but the story inside most retail portfolios looks starkly different. Even as the Nifty and Sensex climb to new records, a majority of retail investors are finding themselves unable to make meaningful returns. Market experts attribute the disconnect to a narrow rally, heavy retail exposure in small-caps and micro-caps, and persistent underperformance across the broader market.

This contrast between headline index strength and portfolio-level weakness highlights a key reality: the bull market is still narrow and selective, not broad-based.

Experts Say Record Highs Mask Weakness Beneath the Index

“Despite the market at new highs, the majority of retail investors, particularly newbies who entered after the Covid crash, are holding portfolios showing losses,” he said.

Vijayakumar explains that the rally is being driven by only a handful of large-cap stocks, while the rest of the market remains weak. The Nifty Smallcap index is still 9% below its previous peak, dragged down by poor earnings, stretched valuations, and low investor appetite.

According to him, retail investors’ “obsession with smallcaps” is the core reason many portfolios have failed to capture the new market highs. Without shifting focus toward high-quality large-caps and select mid-caps, he warns that recovery may remain elusive.

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Broader Market Breadth Shows Retail Portfolios Deep in the Red

Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities, said the benchmark indices often create “an illusion of prosperity.” While the index may hit highs, he noted, “the real story is visible only when you break down what lies beneath.”

Among the top 750 stocks by market capitalisation, 716 have been listed for more than a year:

• Only 252 stocks are showing gains

• 464 stocks are in the red

• The median return is -10.54%

• The average return is -5.24%

Sheth points out that 268 stocks have fallen more than 20%, while only 117 stocks have risen more than 20%, highlighting the severe divergence between index performance and individual stock returns.

The pockets where retail investors are most concentrated — the Nifty Smallcap 250 and Nifty Microcap 250 — are down 9% and 10%, respectively, from the Nifty’s previous all-time high. These segments have been the biggest drag on retail portfolios.

Why Retail Investors Miss Out When Markets Hit New Highs

Retail investors often gravitate toward small-cap and micro-cap stocks due to expectations of high returns. However, experts say that during periods of valuation stress and uneven earnings growth, these categories tend to underperform significantly.

Key reasons why retail investors are not making money despite new highs include:

• Narrow leadership: A few heavyweights (large banks, select IT and FMCG majors) are driving the index.

• Weak earnings in most small-cap companies.

• Stretched valuations across micro-cap themes, especially in momentum-driven pockets.

• Profit taking and rotation away from speculative counters.

• Lower institutional participation in smaller stocks.

As a result, even if the Nifty and Sensex rise, portfolios heavily skewed toward small-caps do not reflect the gains.

Broad-Based Participation Needed Before Retail Portfolios Recover

Experts believe that meaningful improvement in retail portfolios will only happen when the rally broadens across market caps, with consistent participation from mid-caps and small-caps — not just a handful of index-heavyweight stocks.

“Investors are unlikely to see meaningful improvement until the rally broadens across sectors and market caps,” Sheth said.
The broader market is still healing, and retail pain may persist in the near term unless there is a shift in allocation strategy.

Market analysts say investors should closely monitor sectors where institutional flows are picking up — such as banks, capital goods, and large-cap IT — which may offer more stability and sustainable returns in the coming quarters.

The Disconnect Between Index Highs and Investor Returns May Persist

While headline indices reflect optimism around economic resilience, stable macros, and strong institutional participation, the average retail portfolio tells a different story.

The rally will need to expand beyond select large-caps before retail investors start seeing meaningful profits in their holdings.

Until then, India’s market narrative remains split:

• A celebratory index hitting new highs, and

• A struggling retail segment still waiting for broad-based recovery.

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• Bank Nifty
• Sensex