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Domestic flows favor small- and mid-caps as foreign investors stay net sellers

Large-caps have led on 52-week highs, but smaller firms are expected to show faster earnings growth, with some reporting 20% to 25% growth.

Reported · Written up by our desk · Emerging Markets

Mid- and small-cap companies are expected to deliver faster earnings growth than large-caps, as market participants look to “quality” small- and mid-cap stocks for longer-term returns rather than relying on large-cap alpha alone, according to a LiveMint Markets analysis.

The analysis found that 52% of Nifty 50 stocks hit 52-week highs between January and June 2026, versus 31% in the Nifty Midcap 100 and 27% in the Nifty Smallcap 250.

It cited domestic institutional flow dynamics as a key driver, noting that foreign investors have remained net sellers while domestic investors have continued to lead the market.

The piece also linked recent small- and mid-cap performance to rotational interest and liquidity, saying early Iran-war moves left some smaller companies sharply lower, creating a buying opportunity for domestic funds, and it added that limited liquidity and lower foreign portfolio investment in many Smids helped amplify rallies.

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