Midcap Rally Analysis: Will Midcaps Lead the Next Market Rally?

 

1. Objective of the Analysis

• Will Nifty Midcap 150 or Smallcap 250 outperform Nifty50 in the next rally?
• Are midcaps overvalued or reasonably valued?
• Which sectors and top stocks dominate Nifty Midcap 150?
• Which midcap mutual funds are performing the best?

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2. Performance Comparison (From All-Time High → Today)

(From 27 Sep 2024 ATH → 15 Oct 2025)

📌 Index Returns From ATH

• Nifty Midcap 150 → –3.4%
• Nifty50 → –3.9%
• Nifty Smallcap 250 → –8.1%

✔ Conclusion:

Midcaps have fallen less than Nifty50 AND recovered faster.
This increases the probability that midcaps may lead the next rally, provided valuations remain reasonable.

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3. Are Midcaps Overvalued? (Valuation Check)

Using Screener.in – Nifty Midcap 150 PE:

Last 1 Year

• Median PE → 34.7
• Current PE → 33.7

✔ Below median → NOT overvalued

Last 3 Years

• Median PE → 32.6
• Current PE → 33.7

✔ Slightly above median → But still close to fair value

✔ Overall:

Midcaps are not extremely overvalued; valuations are near historical averages.

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4. Sector Weightage in Nifty Midcap 150

Top sectors:

Sector	Weight
Financial Services	25%
Capital Goods	14%
Healthcare	9%
Auto & Auto Components	8%
Information Technology	6%

✔ Midcap strength is likely if:

• banking/finance stays strong
• manufacturing (capital goods) continues its uptrend
• healthcare and autos remain stable

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5. Top 10 Constituents of Nifty Midcap 150

(By weightage – approximate combined ~15–20%)

1. BSE Ltd → Capital Market Theme
2. PB Fintech → Fintech & BFSI
3. HDFC AMC → Capital Market Theme
4. Hero Motocorp → Auto theme
5. Dixon Technologies → Consumer Durables + PLI beneficiary
6. Suzlon Energy → Renewables + Capital Goods
7. Cummins India → Industrial/Capital Goods
8. Coforge → Midcap IT (better than large-cap IT)
9. Persistent Systems → Midcap IT
10. Fortis Healthcare → Healthcare sector

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6. Example Fundamental Analysis: HDFC AMC

(Results released on 15 Oct 2025)

Half Year (H1 FY26 vs H1 FY25)

• Revenue ↑ 20%
• PBT ↑ 16%
• PAT ↑ 24%

Quarterly (Q2 FY26 YoY)

• Revenue ↑ 16%
• PAT ↑ 24%

Quarterly (Q2 vs Q1 FY26)

• Revenue ↑ 6%
• PBT ↓ 1%
• PAT ↓ 4%

Corporate Action

• 1:1 Bonus announced
• Record date → 26 Nov

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7. What to Analyze After Results?

(Useful checklist for any company)

1. Revenue growth
2. Profit growth
3. Corporate actions
4. Management commentary / guidance
5. Future plans
6. Conference call highlights
7. Investor PPT

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8. Top Midcap Mutual Funds (By AUM)

1. HDFC Midcap Opportunities Fund (₹84,855 Cr AUM)
2. Kotak Midcap Fund
3. Nippon India Growth Fund
4. Motilal Oswal Midcap Fund
5. Axis Midcap Fund

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9. Performance Comparison of Midcap Funds

⭐ Best by 1-year returns:

➡️ HDFC Midcap Fund

⭐ Best by 10-year returns:

➡️ Kotak Midcap Fund

⭐ Best by 3 & 5-year returns:

➡️ Motilal Oswal Midcap Fund

⭐ Best Alpha (excess return):

➡️ HDFC Midcap Fund (α = 4.8)

⭐ Lowest Standard Deviation (lowest volatility):

➡️ HDFC Midcap Fund

⭐ Best risk-adjusted returns (Sharpe & Sortino):

➡️ HDFC Midcap Fund

✔ Overall Top Performer:

HDFC Midcap Fund (best in 6 out of 10 parameters)

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10. Final Interpretation

✔ Midcaps have:

• Fallen less
• Recovered faster
• Valuations near historical averages
• Strong sector representation
• Strong fund performance support

🔮 Probability is high that Midcaps may lead the next market rally,

if earnings remain stable and valuations stay reasonable.