Is the Midcap-Smallcap Rally Really Broad-Based? 13Sep2026
(This is my 536th blog since 2010. Over the years, I have covered global financial markets, with a focus on India, and continue to share insights to help readers understand complex topics in simple language.
The views expressed here are for information purposes only and should not be construed as a recommendation or investment advice. While the author is a CFA Charterholder with nearly 25 years of experience in financial markets, this content is intended to share general insights and does not constitute financial guidance.
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2) The Average Stock Has Done Less Well Than the Index
The six-month return of the MidSmallcap 400 index is 14.2 per cent. The median return, over the past six months, of its 400 constituents is just 9.6 per cent.
In other words, the index has done 4.6 percentage points better than the typical stock.
(Note: The index itself is also relatively diversified: only eight stocks have a weight of more than 1 per cent, while the top 10 stocks together account for just 12.1 per cent, as of 31Aug2026. So, the gap between the index and median stock is less likely to be explained simply by a handful of very large constituents.)
This does not necessarily mean that the market is narrowly driven. But it tells us that the index's 14.2 per cent return is not representative of the experience of the median constituent.
Six months vs one year:
The median stock is up 9.6 per cent over six months versus down 8.3 per cent over one year, pointing to a recent recovery.
The index–median gap is 10.9 percentage points over one year, compared with 4.6 percentage points over six months, indicating some improvement in the median stock performance in the past six months period.
Chart showing Nifty MidSmallcap 400 Index versus Median Stock Return >
3) How Many Stocks Are Actually Going Up?
A more intuitive measure is positive breadth: what percentage of the 400 stocks have delivered a positive return over six months?
As of 16Sep2026, 259 stocks, or 64.8 per cent, were in positive territory. The remaining 141 stocks, or 35.2 per cent, had negative returns.
So nearly two-thirds of the stocks have risen over the past six months. That suggests that the market's advance is reaching a reasonably broad part of the universe, rather than being confined to a handful of stocks.
The 64.8 per cent reading is our starting point. The more useful question is how this number changes over time.
A rise in this number, in future, would indicate that participation is broadening, while a decline would indicate that participation is narrowing. Tracking the measure over time should make these changes easier to identify.
4) Percentage beating the index
How Many Stocks Have Actually Outperformed the Index?
Over the past six months, 172 of the 400 stocks have outperformed the index, which has returned 14.2 per cent.
5) The Winners and Losers Are Far Apart
There is another interesting feature of the market: the wide gap between winners and losers.
Chart showing Nifty MidSmallcap 400 Index Return Distribution over the past six months >
The top 10 per cent of stocks had six-month returns of 48.4 per cent or more, while the bottom 10 per cent had returns of -11.6 per cent or less. That is a 60 [(48.4) - (-11.4)] percentage-point gap between the two ends of the market.
This gap is a simple measure of dispersion: how differently stocks are behaving from one another. If it narrows over time, stocks are performing more similarly; if it widens, the divergence between winners and losers is increasing.
For now, the 60-point gap (90th–10th percentile gap) tells us that, despite reasonably broad participation, there is considerable divergence beneath the index.
The 90th–10th percentile spread is a broad indicator of how differently the stocks are performing in an index.
6) What to Track Going Forward
For the Nifty MidSmallcap 400, using the following four measures using six-month returns (updated monthly or quarterly) will be a simple and useful framework to study whether the participation is broadening or narrowing.
A) Index versus median return: currently a 4.6 percentage-point gap (index return higher than the median stock return) in the past six months.
B) Positive breadth: currently 64.8 per cent of stocks have positive six-month returns.
C) Percentage beating the index: how many stocks are outperforming the 14.2 per cent index return. Currently, 43 per cent of the stocks have outperformed the index over the past six months.
D) 90th–10th percentile gap: currently 60 percentage points, measuring the spread between winners and losers.
Together, these capture how representative the index is, how widespread the gains are, and how widely stock performance is diverging. The aim is to build a history over the next one or two years and see how these measures change over time.
7) Summary of our current study
As of 16Sep2026, the picture is mixed. The Nifty MidSmallcap 400 is up 14.2 per cent over six months, with 64.8 per cent of its stocks in positive territory, suggesting reasonably broad participation.
But the index is 4.6 percentage points ahead of the median stock, while the 90th–10th percentile gap is 60 percentage points, pointing to considerable divergence beneath the surface.
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References:
Nifty Indices Nifty MidSmallcap 400 index
Nifty MidSmallcap 400 - factsheet PDF Aug2026
Nifty Indices Research Papers
Nifty Indices methodology document PDF
Additional data:
1) Passive funds tracking the Nifty MidSmallcap 400 Index >
As of now, there is only one passive fund tracking the index, namely,
Navi Nifty MidSmallcap 400 Index Fund - its top stocks as of 31Aug2026 >
2) Nifty 100 Index is basically, a large cap index. Suppose you want to check whether the market breadth or participation of the stocks in the index is wide or narrow, you can check the returns of the Nifty 100 index versus Nifty 100 Equal Weight index.
Over a one-year period, the Nifty 100 is down 5.3 per cent, while the Nifty 100 Equal Weight index is up 0.8 per cent, suggesting that the weakness in the large-cap index has been concentrated in some of its larger constituents.
This divergent performance indicates that participation across the 100 constituents has been considerably better than the headline, market cap-weighted index suggests.
3) Nifty MidSmallcap 400 index factsheet for Aug2026 >
