Smallcaps slide after 2 yrs of outperformance: Here're top gainers, losers

The category saw a reversal of fortune in 2025 amid a broadbased selloff. Krishna Kant & Ram Prasad Sahu analyse the ones to watch out for in 2026

Smallcaps witnessed a sharp reversal in 2025 after two years of robust outperformance. The BSE SmallCap index was down 6.6 per cent year-on-year (Y-o-Y) in CY25, against a 9.1 per cent rise in the benchmark BSE Sensex. This was the worst showing by smallcaps in the past six years. The smallcap index had beaten the Sensex by a healthy margin in the past two years.   

The smallcap selloff  in CY25 was broadbased. At least 73 per cent stocks in the index ended the year in the red, with an advance-to-decline ratio of 0.36. Overall, 872 of the 1,190 BSE SmallCap index stocks saw a decline in share price. Of these, 321 declined by 30 per cent or more. Smaller stocks remain under pressure and the BSE SmallCap index is down 9.1 per cent so far in January 2026, against a 4.3 per cent decline in the Sensex. 

Despite these factors, the smallcap index has outperformed the Sensex over the longer term. In the past 10 years, the BSE SmallCap has appreciated at a compound annual growth rate (CAGR) of 15.8 per cent, compared with the Sensex’s 12.6 per cent between CY15 and CY25. 

This raises the hope of a reversal in fortune for smallcaps, especially the firms with strong business models and healthy balance sheets. Thus, this may be a good time to build a smallcap portfolio by exiting the stocks that have turned pricey after a year of rally and investing in underperformers that could turn around in CY26. 

Here are five best and worst performers of CY25, and the likely road ahead for them in CY26. The sample excludes loss-making companies. Only the stocks with a current market cap of ₹9,150 crore ($1 billion) or higher and those tracked by at least two brokerages have been considered. There has also been an attempt to maintain a sector diversity in this list. 

 

GAINERS 

Lumax Auto Technologies

• Lumax Auto, the top gainer in this list, has continued to outperform the sector with sales and operating profit rising 37 per cent and 51 per cent respectively in Q2 of FY26
• The operating profit margin continued to improve, rising 130 basis points Y-o-Y to 13.4 per cent with the pass through of higher costs
• Given the robust show in the first half of FY26 and growth triggers ahead (new launches, GST tailwinds, premiumisation), Lumax has raised the FY26 revenue growth guidance to 25 per cent from the 20 per cent guided previously
• With 40 per cent of its ₹1,360 crore order book linked to electric vehicle platforms & rising potential content per vehicle (₹70,000-plus), it is well positioned to benefit from both volume growth and premiumisation trends across top OEMs, says ICICI Securities

 

MCX India

• Commodity Exchange operator MCX India has been one of the top gainers in the last year
• Company's stock price was 78.7 per cent in CY25 and it has gained a further 2.5 per cent in January so far
• Rally has been fuelled by a surge in earnings as MCX’s net sales were up 124.8 per cent Y-o-Y while its net profit was up 151.3 per cent Y-o-Y in Q3FY26
• The company has gained from a sharp rise in gold and silver prices and their trading volumes in the second half of CY25
•   Analysts expect the earnings momentum to sustain in the near term as metal prices continue to rise leading to higher trading volume on MCX’s trading platform
•  A strong rally last year has turned the stock expensive with a trailing P/E of 84x and P/BV of 28x, which raises the downside risk if market sentiment turns negative

 

 

Navin Fluorine International

• The September quarter performance of Navin Fluorine was strong with operating profit margins expanding by 1,176 basis points Y-o-Y as operating leverage played out through volume growth, improved yields and logistics efficiency
• Its strategy to deepen wallet share within its existing customer base by leveraging its established marketing network, broadening its product portfolio, and building on long-standing client relationships is expected to help drive growth across all business verticals
• The margin gains going ahead, according to HDFC Securities, is expected to come from inflection in the contract research and manufacturing organisation and improved realisation in the refrigerant gas business with support of backward integration in anhydrous hydrogen fluoride
• Systematix Research has upgraded its earnings estimates for FY26 and FY27 by 14.5-18 per cent given strong margin expansion, higher operating profit margin guidance by management

 

 

RBL Bank

• RBL Bank has been one of the top gainers in the banking industry and its stock price doubled in CY25, though it has faced headwinds in recent weeks
• Rally has been driven by a sharp turnaround in RBL's earnings in FY26 after a poor showing in the second half of FY25
• Banks' consolidated net profit was up 381.7 per cent Y-o-Y in Q3FY26 driven by gains from lower provisions for bad loans
• Topline growth was however muted with gross interest income up just 3.7 per cent Y-o-Y in Q3FY26 while net interest income was up 4.6 per cent Y-o-Y
• Motilal Oswal Securities has cut its earnings estimate for FY26 by 7 per cent given higher provisions but expects better credit growth post upcoming capital infusion from Emirates NBD
• The stock is trading at a P/BV of 1.1x and trailing P/E of 26.9x, both on the higher side that may limit upside from current levels

 

 

Hindustan Copper

• Public sector firm, Hindustan Copper has been one of the top gainers in the small cap space with 116 per cent rise in its share price in last 12 months compared to 4.4 per cent rise in BSE Sensex in the period
• The rally has been fuelled by a sharp rise in copper and other base metal prices in recent months as major countries scramble to secure strategic raw materials
• Higher copper prices have translated into higher revenues and earnings for the metal producer, adding strength to the rally in its share price
• Company’s net sales were up 38.6 per cent Y-o-Y while net profit was up 80.8 per cent Y-o-Y in Q2FY26, its best show in many years
• Analysts remain bullish on the stock given the expectation of a sustained rally in copper prices from higher metal demand for electric vehicles and green energy

   

LOSERS 

Techno Electric & Engineering

• Firm continues to underperform with 31.4 per cent decline in its share price in CY25 and a further 17.4 per cent decline in January so far
• The share price decline has been driven by margins concerns despite robust growth in the firm’s order book and revenue
• Company’s net sales were up 91.1 per cent Y-o-Y in Q2FY26 but net profit was up just 10.4 per cent Y-o-Y due to lower margins and higher tax outgo
• Brokerages however remain bullish on the stock given increasing traction in the energy transmission & data centre demand and company's healthy order book
• ICICI Direct has a price target of ₹1,490 over next 12 months, nearly 67 per cent higher than its current stock price
• The stock is currently trading at a trailing P/E of 23.3x and P/BV of 2.7x, which is on the lower side and provides downside protection to new investors

 

 

Cyient

• In Q3FY26, Cyient’s digital engineering and technology or DET business delivered 1.9 per cent Q-o-Q growth in constant currency despite a seasonally weak quarter
• Margins at the operating profit level improved to 12.4 per cent even after wage hikes reflecting strong cost control and better mix
• Cyient has delivered two consecutive quarters of positive growth in DET alongside its highest-ever deal pipeline, indicating that the worst is behind, says Nuvama Research
• Strong cash generation, a healthy net cash position, and a credible roadmap to reach mid-teens margins by FY27 add confidence
• Given improving growth momentum, margin expansion, and strong medium-term visibility, the stock offers attractive risk-reward, points out IDBI Capital

 

 

KEC International

• Power transmission tower manufacturer, KEC International has seen a sharp decline in its share price last year on growth and margin concerns
• Company's share price was down 38.5 per cent in CY25 followed by another 14.3 per cent decline in January so far
•  Company's net sales were up 19.1 per cent Y-o-Y while net profit was up 88.2 per cent Y-o-Y in Q2FY26 but margins were below expectations
• Analysts at Elara Capital have cut their EPS estimates by 19 per cent for FY26 and 11 per cent for FY27 in lieu of execution of low-margin non-power sector orders
•  Elara Capital also expects KEC to face earnings headwinds from delayed payments for water projects, high debt levels and stretched working capital
•  The stock is trading at a trailing P/E of 24.6x and P/BV of 3x, which is rich for an EPC company with high working capital

 

 

Bata India

• Bata’s September quarter showing was muted, missing estimates on all fronts
• Deferment of purchases and disruption in one of the largest warehouses in July hit revenue growth, while higher markdowns, rising marketing investments and negative operating leverage led to lower margins
• Topline has grown 3 per cent annual rate over FY19–FY25, reflecting subdued demand and rising competition from both global and emerging domestic brands. YES Securities believes these challenges will continue to weigh on the firm’s performance
• The stock trades at 54 times its FY27 earnings per share estimates. In view of near-term growth headwinds and premium valuations, Sharekhan Research has maintained a ‘hold’ rating

 

 

Natco Pharma

• Natco Pharma’s Q2 results came in ahead of expectations, driven by higher-than-estimated sales of cancer drug Revlimid and a favourable raw material mix
• The rising momentum in rest of the markets, the upcoming GLP-1 opportunity and the improving agrochem trajectory with operating profit breakeven nearing could partially mitigate the expected decrease in Revlimid contribution
• Nuvama Research, however, has a ‘hold’ rating given the management’s expectation of a muted US launch pipeline in FY27 and further price reductions in the US semaglutide opportunity
• Nirmal Bang Research, too, remains cautious as growth remains heavily dependent on Revlimid and broad spectrum insecticide Chlorantraniliprole or CTPR