India’s small, mid-cap stocks continue to draw investor interest

After a week of being on edge, stock bulls are betting on a rebound following the India-Pakistan ceasefire. Nifty futures have already rallied nearly 2 per cent. Positive regional sentiment, fueled by progress in China-US trade talks, may further boost sentiment. However, pharma stocks may fall on President Trump’s plans to lower drug prices. Earnings season continues with Tata Steel due to report today.

Tourism worries set to ease

The ceasefire between India and Pakistan may bring much-needed relief to India’s travel and tourism sector, which relies on the April-June period holiday season driven by school summer breaks. Rising tensions had stoked concerns about a potential hit to tourism-related spending. However, with the truce announced on Saturday, the sector looks set to bounce back. That may augur well for shares of companies in the hotels, travel, and airline industries.

Rush for small-caps gains steam 

Mutual fund data for April showed a slight slowdown in overall equity inflows, but small and mid-cap stocks continued to draw investor interest. Equity-focused funds took in a net 243 billion rupees ($2.8 billion) during the month, with small- and mid-cap plans accounting for 30% of that total. What’s more, net purchases in these categories were even higher than large-cap funds — a surprise given the broader Nifty 200 gauge beat the small-cap measure during the same month.

Coal India’s earnings beat expectations 

Coal India’s results once again confirmed the state-run goliath’s ability to deliver higher-than-expected performance, beating consensus earnings in seven of the past eight quarters. Despite recent softness in coal demand, the company’s pact to supply 4,500 megawatts of renewable power to AM Green Ammonia India is boosting investor hopes for further recovery. Coal India’s shares are now close to erasing their year-to-date losses and rank among the top performers on Bloomberg’s coal sector gauge.  

And, finally.. 

Although India and Pakistan agreed to an immediate ceasefire on Saturday, a new Bloomberg Economics index tracking news reports of tensions between the two neighbors has risen to levels seen during past periods of heightened hostility. The index mirrors spikes following the 2019 Pulwama attack and 2020-21 border skirmishes — episodes that eventually de-escalated without degenerating into an all-out war.

More stories like this are available on bloomberg.com

Published on May 12, 2025

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