Mid and small-cap firms to drive India’s next equity rally, says Abakkus chief Sunil Singhania

India’s mid- and small-cap companies are poised to lead the next leg of equity market gains, according to Sunil Singhania, founder of Abakkus Asset Manager LLP. Despite recent underperformance and foreign investor outflows, Singhania believes that structural tailwinds, strong earnings growth, and sectoral shifts will propel broader market indices higher over the next five years.

Speaking to media on October 8, 2025, Singhania emphasized that mid- and small-cap stocks—often overlooked in global portfolios—are set to outperform large caps, driven by growth in new-age sectors such as renewables, semiconductors, and digital platforms. “Mid- and small-caps are the bulls and the tigers—they may falter at times, but when they run, they really run fast,” he said.

Mid and Small-Cap Outlook – Abakkus Chief’s Key Insights

Abakkus Asset Manager, which oversees ₹40,000 crore ($4.5 billion) in assets, has consistently favored mid- and small-cap allocations. Singhania expects annualized returns of 14–15% from these segments over the next five years, citing robust fundamentals and policy tailwinds.

Mid and Small-Cap Earnings Performance – April–June FY26

While the Nifty 50 has gained 6.7% year-to-date, mid-cap indices are down 4.4% and small-cap indices have declined 8.8% from their respective highs. In contrast, the MSCI Asia ex-Japan index has surged over 27% YTD, highlighting India’s relative underperformance and potential catch-up opportunity.

Index Performance – YTD 2025

Foreign investors have withdrawn $17.6 billion from Indian equities in 2025 so far, marking the second-highest outflow on record for the January–September period. However, Singhania believes overseas interest is returning, especially as India remains under-owned in global portfolios. He cited the recent U.S.–India tariff resolution, easing interest rates, GST reforms, and a better-than-expected monsoon as catalysts for a turnaround.

Key Catalysts for Mid and Small-Cap Revival

Singhania also highlighted the structural shift in equity ownership, with domestic institutional investors (DIIs) now holding 30% of Indian equities, up from 22% in 2019. In contrast, foreign institutional investors (FIIs) have reduced their share to 18.6%, reflecting a democratization of equity investing in India.

Equity Ownership Trends – 2019 vs 2025

Retail investors have poured capital into mid-cap, small-cap, and flexi-cap mutual funds, further supporting valuations and liquidity. Singhania believes this trend will continue, especially as digital platforms and fintech apps make equity investing more accessible.

Social media platforms have amplified Singhania’s bullish stance, with hashtags like #MidCapRally, #SmallCapIndia, and #AbakkusOutlook trending across Twitter/X and LinkedIn. Market watchers and retail investors have responded with optimism, viewing the correction as a buying opportunity.

Public Sentiment – Social Media Buzz on Mid and Small-Cap Outlook

In conclusion, India’s mid- and small-cap firms are set to lead the next phase of equity market growth, driven by sectoral innovation, policy support, and resilient domestic flows. As global investors reassess their India exposure and retail participation deepens, the broader market is well-positioned for a structural re-rating.

Disclaimer: This article is based on publicly available financial data, verified market commentary, and expert insights. It does not constitute investment advice or stock recommendation. Readers are advised to consult certified financial professionals and track official disclosures for accurate information.