Diwali cheer missing? Nifty lights up, but your portfolio may be burning; what's driving the disconnect? SAMCO explains
Stock Market Outlook: Investors wondering why their stock portfolios are not rising despite the recent rally in the benchmark Nifty 50 may be overlooking one crucial factor: the market's gains are concentrated in a handful of heavyweight stocks, while midcaps, smallcaps and microcaps continue to struggle.
According to Apurva Sheth, Head of Market Perspectives & Research at SAMCO Securities, the divergence between the performance of largecap stocks and the broader market explains why many investors are yet to see meaningful gains in their portfolios.
Over the past month, the Nifty Top 10 Equal Weight Index surged 10.64%, significantly outperforming broader market indices. The index comprises the 10 heavyweight stocks in the Nifty 50, with each constituent assigned an equal weight of 10% and the index rebalanced every six months.
In contrast, the Nifty Midcap 150 declined 2.74% during the same period. The Nifty Smallcap 250 also fell 2.74%, while the Nifty Microcap 250 dropped 5.32%.
This divergence indicates that the recent market rally has not been broad-based, with gains concentrated in India's largest companies rather than extending across market capitalisations.
Sheth identified two major factors behind the divergence, the first being a valuation catch-up among heavyweight stocks.
Largecap stocks were among the worst performers during the preceding market correction, which had been underway since January 2026. The correction pushed several heavyweight companies to relatively attractive valuations, creating room for a rebound as selling pressure eased and valuations normalised.
The performance of the 10 constituents of the Nifty Top 10 Equal Weight Index highlights this recovery. ICICI Bank and Infosys gained 16% each over the past month, followed by Bharti Airtel, which advanced 14.61%. Kotak Mahindra Bank rose 10.08%, while HDFC Bank gained 10%.
Larsen & Toubro advanced 9.02%, Reliance Industries climbed 8.44%, State Bank of India gained 6.24%, ITC rose 5.91%, and Axis Bank advanced 5.58%.
The average one-month return of these 10 stocks stood at 10.19%. However, their average year-to-date performance remained negative at 6.73%, indicating that the recent rally has not fully reversed their earlier losses.
Their average price-to-earnings ratio stood at 21.18, while the average price-to-book ratio was 3.43, according to the data shared by SAMCO Securities.
"The rally has been concentrated in India's largest stocks, with the broader market struggling to participate. There are two important factors behind this divergence," Sheth said.
The second factor supporting heavyweight stocks is the return of foreign portfolio investors (FPIs) to the domestic equity market.
FPIs have invested approximately ₹40,000 crore over the last eight sessions, according to Sheth. Their initial preference when returning to Indian equities is typically large, liquid and well-established companies.
These companies offer the liquidity and scale required by foreign investors to deploy substantial capital, making heavyweight stocks the natural beneficiaries of renewed institutional inflows.
The provisional FII inflow chart on page 3 of the report also highlights the improvement in foreign flows, with inflows turning stronger towards the beginning of November after several sessions of selling in October.
The recent market recovery should not yet be interpreted as a broad-based turnaround, as midcaps and smallcaps have continued to underperform even as heavyweight stocks rebound.
For investors whose portfolios are concentrated in these broader market segments, the divergence could explain why their returns have not kept pace with the benchmark Nifty.
"The takeaway is clear. This is not yet a broad-based market recovery. It is a heavyweight-led rebound, driven by valuation comfort and the return of institutional flows," Sheth said.
The next crucial test for the market will be whether the rally eventually broadens to midcaps and smallcaps or remains concentrated in a handful of large companies. Until broader participation returns, investors may continue to find their portfolios lagging the benchmark despite the Nifty's gains.
Pranati Deva is a seasoned financial journalist with over a decade of experience in high-pressure newsroom environments, currently working as a Senior Sub Editor at LiveMint. Over the years, she has developed a reputation for sharp editorial judgement, a strong grasp of market dynamics, and the ability to translate complex financial developments into clear, engaging stories for a wide audience. <br><br> Her core areas of coverage include stock markets, leading listed companies, currencies, and commodities, with a particular strength in fast-paced, real-time market reporting. She is known for handling breaking market news, earnings-driven stock movements, and macroeconomic developments with speed, accuracy, and context—qualities that are essential in financial journalism. <br><br> Pranati has built a diverse and credible professional track record across some of India’s most respected news organisations, including MintGenie, CNBC-TV18, Business Standard and EconomicTimes.com. During her stints at these platforms, she produced data-driven market stories, curated and steered live blogs during volatile trading sessions, and conducted interviews with market veterans, fund managers, economists, and industry experts. Her work often combines on-ground reporting with analytical depth, helping readers make sense of daily market fluctuations and longer-term trends. An alumnus of the Symbiosis Institute of Media and Communications and Hansraj College, University of Delhi, Pranati brings a strong academic foundation to her journalism. She specialises in real-time financial reporting, with a keen focus on precision, balance, and insight, aiming to decode market movements in a way that is both informative and accessible to readers across experience levels.
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HomeMarketsStock MarketsDiwali cheer missing? Nifty lights up, but your portfolio may be burning; what's driving the disconnect? SAMCO explains
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