NIFTY Midcap 100, Smallcap 100 rally nearly 2%; check top gainers

Indian benchmark indices opened lower on Wednesday morning in a highly volatile morning session. Trump’s new tariff war threats, rising dollar index and mixed global market cues are some of the key triggers for the markets. Despite the mixed cues, the broader indices outperformed the benchmark indices on Wednesday morning.

The NIFTY50 and SENSEX traded 0.15% higher, recouping all the opening losses. On the other hand, the broader indices, like the NIFTY midcap 100 and small-cap hundred, outpaced the NIFTY50 by a wide margin. The NIFTY midcap 100 traded at 50,49,7, up 1.5% or 750 points, and the NIFTY small cap 100 traded at 1574,1, up by 2% or 311 points at 10:00 am.

The broader market indices faced the brunt of heavy selling pressure amongst all other indices as they corrected more than 20% from the peak achieved in September 2024. The key reasons behind the fall were expectations of dismal earnings and high valuations.

Earnings and Valuation

On a consolidated basis, the overall earnings for the NIFTY small-cap 100 reported a 17% YoY jump in the net profit after tax for the 72 companies. On the valuation front, the index traded at a price-to-earnings (PE) ratio of 25.9x lower than the peak of 36.81 in December 2024. On a longer-term basis, the NIFTY small-cap 100 PE is trading below its 10-year median of 33.9x, indicating a cool-off in bloated valuations.

Similarly, the 86 companies in the NIFTY mid-cap 100’s consolidated bottom-line earnings grew by 13.7% YoY. On the operational front, the same set of companies' EBITDA for the quarter rose by 14% YoY in Q3FY25. However, the valuations still remain bloated when compared to their long-term average. The NIFTY midcap 100 currently traded at 33.5x price-to-earnings ratio, much higher than the 10-year median PE of 28.6x.