Breakout rally ahead? InCred Equities predicts 25% upside in Nifty SmallCap

Nifty SmallCap index outlook: The SmallCap index is on the verge of a breakout on technical charts with a one-year target of 21,300-22,200 -- a 20-25 per cent upside from current levels

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Nifty SmallCap index outlook: The sentiment in the Indian stock market has taken a sharp turn over the past few weeks with analysts betting on a catch-up rally in India. The bullish calls on Indian markets follow a period of its underperformance compared to global markets, and analysts believe receding geopolitical tensions, healthy macroeconomic indicators, and a cyclical recovery in both economic growth and corporate earnings may take the markets higher.

 

On the bourses, the Nifty50 and the BSE Sensex indices touched fresh all-time highs on Monday, December 1, 2025. The Sensex index hit a record high of 86,159.02, while the Nifty scaled 26,325.80. In fact, the Nifty MidCap index, too, touched a new lifetime high of 61,311.25 on December 1, 2025. 

 

Investors, however, are waiting for the broader -- Nifty SmallCap – to resume its bull run as most retail investors have their money parked in small ticket stocks. The index, last, touched its record high level of 19,716.20 on December 12, 2024.

 

And analysts at InCred Equities think the uptrend in the Nifty SmallCap index may resume soon.  FOLLOW STOCK MARKET UPDATES TODAY LIVE

Nifty SmallCap Index: Poised for 25 per cent upside

In its latest report, technical analysts at InCred Equities said the smallcap space has been under intense pressure over the past few months, with the majority of smallcap stocks witnessing deep corrections. So far in calendar year 2025, the Nifty SmallCap index has slipped 5.2 per cent

 

"Our expectations are that this underperformance in smallcap index is likely to end and an upside of 20-25 per cent can be achieved by December 2026, thus providing wonderful investment opportunities for the long term," the brokerage said in its latest report titled 'From Fear to Fortune: The Comeback Wave'.

 

According to InCred Equities, the Nifty SmallCap100 index witnessed a strong price correction in March this year, and has been undergoing time correction since then. 

Nifty SmallCap index monthly chart | Source: TradingView, InCred Equities report

 

However, the index bounced back sharply after retesting the multiyear breakout, around 14,,660 levels, implying the worst may be over and it can pick up strong momentum in the coming months. The last time the index witnessed such a breakout rally was in calendar year 2023, when a 15-year ascending trendline breakout resulted in a significant upside.

 

"Momentum indicator, RSI, has bounced from a strong support zone, with early signs of hidden bullish divergence. This supports the postulate of a strong upside," analysts at the brokerage said.

 

Additionally, the SmallCap index seems to have completed a small wave ii (based on Elliot wave theory) on the weekly chart, implying it can cross previous life high to complete wave iii. 

Nifty SmallCap index weekly chart | Source: TradingView, InCred Equities report

 

Notably, Elliott Wave analysis says that markets move in waves -- motive (impulse) and corrective waves -- where impulse waves consist of five sub-waves moving in the trend's direction, and corrective waves involve three sub-waves moving against the trend.

 

In this backdrop, InCred Equities predicts that the Nifty SmallCap index can move 20-25 per cent from current levels to complete the larger wave 5.

 

"The index is also forming an 'Inverse Head and Shoulder' pattern with breakout confirmation on close above 19,200 levels. The pattern target syncs with the Elliot wave target of 21,300-22,200 levels," it said. The index closed at 17,874.70 on Monday.  ALSO READ | Nifty50 to hit 29,300 by end-2026? Nomura lists top 20 stock picks

Outlook for Midcaps and smallcaps

Assessing the overall broader market sentiment, InCred Equities said the Nifty MidSmallCap400 index is trading in an ascending channel pattern since 2022 and is currently on the verge of a consolidation breakout, which, once confirmed, can result in a strong upside.

 

"The index seems to have completed a smaller wave ii pattern, which supports the overall expectations of 20-25 per cent upside in a year," it said.        ====================  Disclaimer: The views expressed by the brokerage in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.