The broader market indices outperformed the benchmark index Nifty 50 in Q1 FY26 by a wide margin. Here are the factors that played a crucial role in this rally
The stock market saw a strong start to FY26. However, it was the mid- and small-cap segments that truly stole the show in the first quarter (Q1). While the headline Nifty 50 index gained a moderate 8.49 per cent during the period, the Nifty Midcap 100 and Nifty Smallcap 100 raced far ahead and delivered double-digit returns.
The Nifty Midcap 100 index rallied 15.61 per cent, rising over 8,000 points to end the quarter at 59,741. Meanwhile, the Nifty Smallcap 100 index climbed 18.51 per cent, closing at 19,075, nearly 3,000 points higher than where it began in April.
A steady inflow of retail investors’ money through systematic investment plans (SIPs) in mutual funds and domestic institutional investors (DIIs) inflow, coupled with improving macroeconomic conditions and easing geopolitical tensions led to this rally, according to experts.
Ajit Mishra, senior vice president, research at Religare Broking, says, “The buoyancy in the broader indices is largely driven by strong domestic inflows and record-high SIP contributions. Investor confidence is high, backed by favourable macro indicators and a positive outlook for growth.”
Mutual funds have been major buyers in this rally. DIIs, which include mutual funds, bought Rs 28,228 crore worth of equities in April, Rs 67,642 crore in May, and Rs 72,674 crore in June. Interestingly, June marked their 23rd consecutive month of net inflows.
Foreign Institutional Investor (FII) inflows also stayed strong, with Rs 2,735.02 crore coming in April, Rs 11,773.25 crore in May, and Rs 7,488.98 crore in June.
Retail investors also continued to play their part. SIP inflows stood at Rs 26,632 crore in April and Rs 26,688 crore in May, according to data from the Association of Mutual Funds in India (Amfi). June data is still awaited. Over 10.51 million new mutual fund SIP accounts were opened in April and May alone.
“Mid and smallcaps typically offer higher growth potential, especially in liquidity-driven, optimistic market phases,” says Mishra.