It’s History! Smallcaps could build on big gains last month

Mumbai: Will Nifty Smallcap 100 index‘s unprecedented 18% jump in April throw open the doors for more gains over the next 12 months? Investors have reason to be optimistic about its chances if historical data are to go by. In six of the past seven instances when the index rose more than 15% in a month, it went on to post gains over the next 12 months, data from Valentis Advisors showed.

In one month, the small-cap gauge ended five times higher, while over three months, the index advanced on six occasions. Unlike in the past, elevated share valuations among small-caps stand in the way of upside.

“We continue to remain positive on small caps over an 18-24-month view, but the main caveat is current valuations are richer than in prior episodes, potentially capping upside below historical medians,” said Jyotivardhan Jaipuria, founder & managing director at Valentis Advisors.

The Nifty Smallcap 100 rallied 18.4% in April – the third-highest monthly gains since its inception in March 2011. In March, the index fell 10% amid the conflict, worsening the slide that started in September 2024. While April’s rebound clawed back some losses, it also pushed valuations higher.

“Valuations in small-caps are above historical averages, but there is scope for 5-7% upside in the next couple of months,” said Abhilash Pagaria, head of Alternative & Quantitative Research, Nuvama Wealth. Investors have priced in shocks from elevated oil prices, but a spike above $125 could spark a sell-off, he said.