NIFTY Midcap select beats large cap indices, rallies 5.3% for FY26; here is why

Indian benchmark indices closed on the last day of FY26 in the red by losing 2% lower as the investors remain anxious about the outcome of the war between the US, Israel and Iran. The benchmark indices fell more than 11% in March, the most since March 2020. The recent fall in the Indian markets was primarily driven by a sharp rise in crude oil prices amid the ongoing war in the Middle East. Along with the benchmark indices, the majority of the broader indices also closed in red for FY26, except for one category.

The midcap category outperformed the benchmark index by delivering positive returns for FY26. All the major midcap indices, like NIFTY Midcap 50 (+2.9%), Midcap 100 (+ and Midcap 150, delivered positive returns, with Midcap select outperforming the most, with 5.3% returns. The outperformance comes despite a sharp drawdown in March, when all major indices fell by more than 10% across the board.

Here is why the Midcap Select index outperformed the benchmark indices

Concentrated sectoral bets

The index holds 25 stocks, which are diversified into sectors like financial services, Capital goods, Automobile components, Healthcare, Information technology and others, including Telecommunications, chemicals, and Realty. However, Financial services and Capital goods constitute nearly 50% of the weightage, while Automobile components (9.9%), Healthcare (12.1%), consumer services (6.56%), Telecommunication (4.89%), IT (4.79%), Consumer Durable (3.6%), FMCG (3.52%), Chemicals (3.20%) and Oil & Gas (2.91%). The concentration in financial services and capital goods has yielded a strong outcome for the index.

Judicious stock allocation

Similar to concentrated bets in sectors, the stock-specific concentration also played a vital role in the outperformance of the index. The index has the liquid midcap stocks, which are selected from the Nifty Midcap 150 index and available in the F&O segment as well.

Source: NIFTY Midcap Select factsheet, NSE data

The above top five stocks hold more than 30% weightage in the index and have rallied more than as much as 47% in FY26. Out of the top 10 highest weightage stocks, only three delivered negative returns, up to -28%, while seven stocks delivered positive returns, up to as high as 57%. The skewness towards stocks delivering positive and robust returns during the financial year helped the overall index to become the top gainer amongst the broader market indices.

Superior earnings

Along with selective and concentrated bets, the index also delivered superior earnings performance in the latest quarterly results. The NIFTY Midcap Select index posted ~11.5% YoY topline growth as compared to ~8.5% for NIFTY50 for Q3FY26. The operational profit for the category also improved by ~14.5% for the NIFTY Midcap Select index as against ~10.2% for NIFTY50.

Reasonable valuations

The top weightage stocks like BSE Ltd, Lupin, Hero MotoCorp delivered robust profitability growth for the quarter, keeping the valuations attractive. The index currently trades at a 29.4x price-to-earnings ratio and 4.13x price-to-book value on a trailing twelve-month basis, sharply lower than the previous year’s valuation of 61.x PE and 8.4x PB in April 2025.