Smallcap Stocks Defy Market Downturn: Double-Digit Returns Amid Sensex, Nifty50 Decline

In the past week, the BSE Sensex index declined by 444.71 points or 0.51 percent, closing at 85,267.66, while the Nifty50 index fell 139.5 points or 0.53 percent, settling at 26,046.95. The broader market indices mirrored this trend, falling 0.4 percent each, extending their losing streak for the second consecutive week. This downturn was driven by consistent foreign institutional investor (FII) outflows, a weakening rupee, and uncertainty over the US-India trade deal.

The Foreign Institutional Investors (FIIs) offloaded equities worth Rs 9,201.89 crore, while Domestic Institutional Investors (DIIs) continued their buying spree, purchasing equities worth Rs 20,184.70 crore. Among sectors, the Nifty Defence index shed 3 percent, while the Nifty Media, Nifty PSU Bank, Nifty IT, and Nifty FMCG sectors fell between 1-1.7 percent. On the positive side, the Nifty Metal index rose 2 percent, and the Nifty Consumer Durables index added 0.4 percent.

Indian equities opened the week on a subdued note, slipping below 26,000 due to caution ahead of the U.S. Federal Reserve policy decision, sustained FII outflows, a weakening rupee, and uncertainty over U.S.–India trade negotiations. Global risk-off sentiment was further heightened by rising Japanese bond yields and expectations of a Bank of Japan (BoJ) rate hike in December. Sectoral performance was mixed, with the IT sector under pressure, while PSU banks, real estate, and consumer durables witnessed selective buying, according to Vinod Nair, Head of Research at Geojit Investments.

Market sentiment improved sharply later in the week after the Fed announced a 25-basis point rate cut, easing liquidity concerns and fuelling hopes of renewed FII inflows. With supportive central bank policies, steady domestic investments, and optimism over trade progress despite unclear timelines, benchmarks closed the week on a strong note.

Looking ahead, markets are likely to maintain a positive bias but remain sensitive to rupee stability, FII flow trends, and clarity on trade agreements, alongside global cues from the BoJ, European Central Bank (ECB), and Bank of England (BoE). Risks persist from currency fluctuations and global trade uncertainties; however, improving earnings visibility and liquidity support provide a constructive backdrop and downside protection, added Nair.

The BSE Small-cap index fell 0.4 percent. However, some smallcap stocks managed to defy the market downturn, delivering double-digit returns. Stocks like Fermenta Biotech, Stallion India Fluorochemicals, Rolex Rings, Sri Adhikari Brothers Television, Dolat Algotech, Transformers and Rectifiers India, Suratwwala Business Group, PRAVEG, Dredging Corporation India, Blue Cloud Softech Solutions, and EFC (I) added between 16-26 percent. On the other hand, stocks like Refex Industries, Kothari Industrial Corporation, Hubtown, Bliss GVS Pharma, Jagatjit Industries, Websol Energy System, Fino Payments Bank, Deccan Gold Mines, and Reliance Infrastructure slipped between 12-23 percent.

Nifty on the weekly chart formed a small bear candle with a long lower shadow, signaling the emergence of sharp buying in the market from near immediate supports. The underlying trend of Nifty continues to be positive, with the next upside levels to be watched around 26,300-26,400. Immediate support is placed at 25,900, according to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.

The bulls staged a strong comeback as Nifty advanced for the second consecutive session, closing above the 26,000 mark. Earlier in the week, the index took support near its 50-DMA at 25,720, rebounding firmly from that level, which is expected to remain a key support zone. Nifty also moved above its short-term 21-DMA at 26,020, reinforcing the positive momentum. If Nifty manages to hold above the 26,000 level, a short-covering move toward 26,200–26,250 is possible in the coming week, noted Nilesh Jain, Head – Technical and Derivatives Research Analyst at Centrum Broking.

On the weekly scale, the index has formed a small red candle with a long lower shadow, indicating buying interest at lower levels. However, on the upside, 26,200 and 26,325 will act as stiff resistance levels in the short term. On the downside, 25,700 will act as a crucial support level. As long as the index holds above 25,700, it is likely to consolidate within the 25,700–26,325 range in the short term, according to Hrishikesh Yedve, AVP Technical and Derivative Research at Asit C. Mehta Investment Intermediates.