Small-cap, mid-cap outperform Nifty, Sensex in May as risk-on trade is back

The PSU Bank index surged nearly 3 per cent, while the metal and IT sectors dragged the indices lower.
| Photo Credit:
PRIMEIMAGES

The Nifty 50 jumped 1.7 per cent in May to 24,750.70 and the BSE Sensex rose 1.5 per cent to 81,451.01 in May.

However, broader small-caps and mid-caps stole the thunder this month by jumping 8.7 per cent and 6.1 per cent, respectively, as traders and investors revert to risk-on strategy amid a slew of positives such as RBI’s ₹2.69-lakh crore dividend to the Government for FY25, good monsoons and the US President Donald Trump’s concession on recently proposed 50 per cent tariffs on the European Union to July 9.

The India VIX eased over 1 per cent, signaling contained risk sentiment.

“The market’s winning streak in May was supported by easing tariff concerns, an improving domestic outlook, largely in-line Q4 earnings, and steady foreign capital inflow,” said Satish Chandra Aluri, Lemonn Markets Desk.

FPIs turn buyers

FPIs bought about ₹20,000 crore worth of shares in May.

Broader mid- and small-cap stocks stood out in May, outperforming the large-cap benchmarks. “This rally was driven by better-than-expected Q4 results and cooling valuations in previously stretched segments. Improved global sentiment after the tariff pause, optimism around robust economic growth, expectations of an above-normal monsoon, and the RBI’s pivot toward rate cuts also lifted market confidence,” he added..

However, markets on Friday closed lower as investors turned cautious after a US federal appeals court reinstated tariffs on foreign imports. The Sensex dropped 182.01 points or 0.22 per cent to close at 81,451.01 and the Nifty 50 fell 82.90 points or 0.33 per cent to 24,750.70.

The sectoral performance was mixed on Friday, with the PSU Bank index surging nearly 3 per cent, while the metal and IT sectors dragged the indices lower. The Nifty Metal index declined 1.7 per cent, IT fell 1.2 per cent and Auto dropped 0.98 per cent.

Among individual stocks, Eternal emerged as the top gainer, jumping 4.98 per cent to ₹239.75. SBI gained 2.09 per cent to ₹814 and HDFC Bank rose 0.73 per cent to ₹1,941.50.

On the losing side, Bajaj Auto led the decline, falling 3.10 per cent to ₹8,599 and Hindalco dropped 2.51 per cent to ₹633.70.

“Markets began the June expiry on a muted note and ended marginally lower, continuing the ongoing consolidation phase,” said Ajit Mishra, SVP Research at Religare Broking. “We recommend maintaining a ‘buy on dips’ approach, unless the Nifty decisively breaks below its first line of defence — the 20-day exponential moving average, currently around the 24,600 level.”

“All eyes are now on the upcoming US Core PCE Price Index data and next week’s crucial RBI monetary policy decision,” said analysts, with expectations of a potential rate cut supporting market sentiment despite near-term consolidation.

Published on May 30, 2025