Money will be made in small-cap stocks now in Indian stock market: Shankar Sharma’s latest call

Stock market veteran and founder of GQuant Investech, Shankar Sharma, believes 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 (formerly Twitter), Sharma said that he sees "exceptional opportunity and value" in small-cap stocks, adding that the segment could outperform larger companies in the coming period.

"I do believe that now small caps in India offer exceptional opportunity and value over Large Caps. That's where the money will get made from here on in India," said Shankar Sharma on Wednesday, March 11.

Contra Bet!

His views come as a contra bet amid most analysts and brokerages recommending the safety of the large-cap stocks against mid- and small-caps, especially in light of the recent pressure on Dalal Street due to the geopolitical tensions in the Middle East and elevated valuations.

A source of relative attractiveness can be found in the large-cap universe of stocks, said DSP Mutual Fund's report earlier this month, as it finds SMID valuations to be still in an expensive zone.

Similarly, ASK Investment Managers in a market outlook note for this month said that it remains firmly tilted towards large-caps. “Their relative valuation comfort, earnings stability and stronger fundamental visibility position them well in the current volatile environment.”

Large-caps are currently trading closer to their long-term valuations, whereas the small and midcap segment continues to look relatively expensive, it opined.

The Nifty Smallcap 100 index is down 7% so far in 2026 after falling 5.6% in 2025. However, this decline has come after high double-digit gains of 24% in 2024 and 55% in 2023, shows Trendlyne data.

While small-cap stocks have witnessed sharp corrections, there are signs of an earnings rebound. The 3QFY26 earnings performance of the Nifty-500 was fueled by mid- and small-cap companies, according to an analysis by Motilal Oswal Financial Services.

Aggregate earnings of the Nifty Midcap-150 companies grew 20% YoY, while Smallcap-250 companies recorded 26% YoY growth on a soft base. In comparison, the aggregate earnings growth for the Nifty-100 constituents stood at 18% YoY.

Small-cap stocks are often seen as high-growth opportunities because they operate in earlier stages of business expansion compared with 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.

Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.