Indian midcap and smallcap stocks continued their upward momentum for the third consecutive session, outperforming frontline indices and reviving optimism around a potential Santa Rally in the broader markets.
According to Jahol Prajapati, Research Analyst at SAMCO Securities, historical trends strongly favour further upside in the coming days. Based on 10-year market data, smallcap stocks have emerged as the biggest beneficiaries during the year-end seasonal rally.
Smallcaps Lead Santa Rally Trend
Prajapati highlighted that smallcap indices have delivered an average return of 3.55 percent during the Santa Rally period over the past decade, with a 100 percent win rate, indicating uninterrupted gains during this seasonal window.
“Statistically, there is at least a 90 percent probability of a Santa Rally playing out in midcap and smallcap stocks,” he said, adding that improving market breadth and renewed risk appetite are supporting the current uptrend.
Broader Market Sentiment Improves
The sustained buying interest in broader markets comes amid easing volatility and selective bargain-hunting after recent corrections. Investors appear to be rotating into high-beta stocks as expectations build for a year-end rally driven by liquidity, seasonal optimism, and improving global cues.
With smallcaps historically outperforming during this phase, analysts believe the broader market could continue to outperform benchmark indices if sentiment remains supportive.
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