Small-Cap Stocks Poised for Growth, Says Shankar Sharma

Indian Stock Market Outlook: Small-Cap Stocks Seen as Key Driver of Wealth Creation

GQuant Investech founder Shankar Sharma believes that the next phase of wealth creation in the Indian stock market will come from small-cap stocks, rather than large-caps. In a recent post on social media platform X, Sharma highlighted the exceptional opportunity and value in small-cap stocks, which could outperform larger companies in the coming period.

Despite the recent pressure on the market due to geopolitical tensions in the Middle East and elevated valuations, DSP Mutual Fund's report suggests that large-cap stocks may offer a source of relative attractiveness due to their more stable valuations and earnings stability. Conversely, ASK Investment Managers remains firmly tilted towards large-caps, citing their relative valuation comfort and stronger fundamental visibility.

However, the Nifty Smallcap 100 index has declined by 7% so far in 2026, following a 5.6% drop in 2025. Despite this decline, there are signs of an earnings rebound, with aggregate earnings of Nifty Midcap-150 companies growing 20% YoY and Smallcap-250 companies recording 26% YoY growth in the 3QFY26 earnings performance.

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Small-cap stocks are often seen as high-growth opportunities due to their earlier stages of business expansion compared to established large-cap firms. As economic growth broadens and domestic demand strengthens, smaller companies can benefit from faster earnings growth and market share gains. Sharma's view reflects a broader debate within the market over whether the next leg of the Indian equity rally could be driven by the broader market rather than index heavyweights.