Indian equities performed strongly in April, with smaller companies leading the surge, as per a report by OmniScience Capital. The Nifty Smallcap 250 index saw a remarkable 13.4% return, while the Nifty Microcap 250 index delivered 16.2% returns during the month. The report highlighted that the smallest market-cap segments outperformed, with select stocks showing significant returns.
The report’s “Bharat Vectors” framework, encompassing around 1,500 investible companies, indicated that the market’s smallest segments excelled. Stocks with an average market cap of about 1,500 crore and those with a market cap around 3,000 crore yielded returns of 25.2% and 23.2%, respectively. Despite concerns like geopolitical tensions and foreign institutional investor outflows, Indian equities showed resilience across the market spectrum.
The market rally, occurring amidst deteriorating macro indicators, underscored the influence of bottom-up fundamentals on equity markets over time. The report emphasized that the rally was more about a valuation re-rating than an enhancement in business fundamentals. Dr. Vikas Gupta, CEO and Chief Investment Strategist, likened the market to a magician, diverting attention from macros to focus on fundamentals, growth, and mispricing for returns.
Return on equity (RoE), leverage, and growth expectations remained steady across segments, indicating no sudden improvement in business performance. Notably, price-to-earnings (P/E) and price-to-book (P/B) multiples expanded significantly, aligning valuations with fundamental strength post a cautious period. Ashwini Shami, President and Chief Portfolio Manager, advised investors to target companies with low leverage, high RoEs, growth potential, and appealing valuations for investment opportunities.
Foreign institutional investors continued to be net sellers, with outflows of around Rs 1.75 lakh crore in CY26, including approximately Rs 44,000 crore in April.
