Despite India's impressive economic growth, which has led global brokerages like Morgan Stanley and Citi to raise their growth forecasts for the country to 7.3% for the fiscal year ending March 2027, the Nifty 50 index has struggled, declining 8% since the start of the year.
Experts attribute this disconnect to the heavy concentration of the index in financial services and IT sectors, which are not fully capturing the economic activity in emerging sectors such as manufacturing and fintech.
While large-cap stocks have faced challenges, mid-cap and small-cap stocks have shown stronger performance, with mid-cap companies reporting 31% earnings growth compared to 11% for Nifty 50 companies in the June quarter.
This shift indicates that a significant portion of India's economic activity is occurring outside of the major equity indices, suggesting that investors may need to look beyond large-cap stocks to capture the growth potential in smaller firms that are more aligned with the country's economic acceleration