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What explains the midcap index surging nearly 2% despite the Sensex staying almost flat?

While the BSE MidCap index gained 1.78 per cent, Nifty MidCap 50 and Nifty MidCap 100 rose by 1.58 per cent and 1.86 per cent, respectively.

On Thursday, benchmark indices Sensex and Nifty 50 rose marginally by 0.15 per cent and 0.22 per cent, respectively. (File Photo/PTI)

The mid cap index witnessed a sharp rally on Thursday despite a marginal 0.15 per cent rise in benchmark Sensex. Experts say that the rise in the mid cap index was driven by value buying after some of the stocks in the segment reported quarterly results in line with market expectations.

While the BSE MidCap index gained 1.78 per cent, Nifty MidCap 50 and Nifty MidCap 100 rose by 1.58 per cent and 1.86 per cent, respectively. This jump in midcap stocks came on a day when benchmark indices, Sensex and Nifty 50, rose marginally by 0.15 per cent and 0.22 per cent, respectively.

“On Thursday, we witnessed some value buying in beaten-down midcap stocks, where recent quarterly results are as per market expectations, especially in the information technology and consumer durable sectors,” said Devarsh Vakil, Head of Prime Research, HDFC Securities.

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Earnings Boost

Mid-size IT services company Persistent Systems reported a 30.42 per cent jump in its consolidated net profit at Rs 373 crore in the December 2024 quarter, as against Rs 286 crore reported in the year-ago period. Its revenue rose 23 per cent to Rs 3,062.28 crore in Q3 FY2025, compared to Rs 2498.22 crore in Q3 FY2024. IT major Coforge Ltd’s consolidated adjusted profit after tax (excluding minority factor) rose 10.3 per cent to Rs 268 crore and gross revenue increased by 42.8 per cent year-on-year to Rs 3,318.2 crore in Q3 FY2025.

“There has been a smart rally in some IT midcaps like Coforge (up 12 per cent) and Persistent Systems (up 11 per cent) in response to better-than-expected results. Some other beaten down midcaps also saw a rally,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

In the calendar year 2024, the Nifty 50 generated around 9 per cent returns, while the Nifty MidCap 100 and Nifty SmallCap 100 delivered nearly 24 per cent returns each. Notably, the Nifty 50 gains were driven by a 16 per cent growth in earnings. In contrast, the midcap and small-cap indices witnessed multiple expansions despite earnings growth being relatively muted—8 per cent and 6 per cent, respectively.

“We were cautious on the smaller stocks, as they have been seeing the brunt of selling off-late,” said Vakil.