Smallcaps, Midcaps Lag Sensex This Year; Outlook Cautiously Optimistic

• Smallcap and midcap stocks underperformed the Sensex in 2025 after strong rallies in 2023-2024.
• Underperformance is attributed to market normalization, elevated valuations, rupee depreciation, and FII outflows.
• BSE Sensex gained 9.30% this year, while midcap rose 0.77% and smallcap declined 6.68%.
• Investors shifted focus to largecap stocks due to global uncertainty and stable earnings visibility.
• Outlook remains cautiously optimistic, with selective opportunities expected as valuations cool and earnings improve.

Why It Matters: Smallcaps and midcaps lagged Sensex in 2025 due to normalization, but future outlook is cautiously optimistic.