The NIFTY Small-cap 100 index has delivered exceptional performance in 2026, soaring over 13% on a year-to-date basis and reaching fresh record highs. According to reports from Upstox, this outperformance comes despite broader market challenges, with the NIFTY50 delivering negative returns of -8% for the same period. The NIFTY Midcap 100 has also advanced 5.8% in 2026, while the NIFTY Microcap 250 has been the standout performer with gains of 17.5% in the same period. Most of these indices have achieved fresh record highs after a two-year absence from peak levels.
The NIFTY Small-cap 100 has undergone significant portfolio restructuring since its previous record high in December 2024. As reported by Upstox, during the first semi-annual review in March 2025, approximately 10-12 stocks were eliminated from the index, followed by another 10-12 stocks in December 2025. However, the March 2026 rebalancing was particularly significant, with 24 stocks out of 100 being eliminated, creating substantial changes in the benchmark's composition. New additions to the index include GE Vernova T&D, Hindustan Copper, Anupan Rasayan, Anthem Biosciences, Blue Jet Healthcare, ICICI Prudential AMC, Piramal Finance, HDB Financial, Tata Capital, and NTPC Green.
The index composition has witnessed significant sectoral weightage changes that have contributed to the current rally. According to Upstox analysis, the Financial Services sectoral weightage increased from 24.2% in December 2024 to 32.2% in July 2026, while the Healthcare sector's weightage rose from 10.2% to 13.2% in the same period. The Automobile & Auto Components sector has shown the most dramatic shift, with weightage increasing from 2% in December 2024 to 8.06% in July 2026. Additionally, the Metals & Mining sector gained 1.4% and Realty sector increased by 0.21% during this period.
Earnings growth has been a key factor supporting the small-cap rally, with overall earnings growing by 22.7% since the previous peak in December 2024. As reported by Upstox, this growth significantly outpaced the NIFTY50 (+11.8%) and NIFTY 500 (+7.5%) indices. The earnings improvement was primarily driven by skewness towards high-growth sectors including Financials, Healthcare, Automobile, Capital Goods, and others. Smallcap companies covered by Motilal Oswal delivered 31% year-on-year earnings growth in the June quarter, ahead of the brokerage's 22% estimate, with around 75% of the smallcap coverage universe meeting or exceeding expectations. Financials and oil and gas led the earnings performance, while NBFC lenders, private banks, NBFC non-lenders and chemicals also contributed.
Despite reaching record highs, the NIFTY Small-cap 100 currently trades at more reasonable valuations compared to its previous peak. According to Upstox analysis, at the previous peak in December 2024, the index was trading at an over 36x price-to-earnings ratio, displaying strong overheatedness with limited earnings growth surprises. However, even at current record-high levels, which are over 6% above the previous record of 19,716, the index continues to trade at 31x price-to-earnings ratio, showing a sharp discount to previous record-high valuations and closer to the 5-year median price-to-earnings ratio of 29x. The forward earnings picture also favours smaller companies, with FY27 profit growth estimated at 34% for smallcaps compared to 16% for Nifty 100 and 20% for midcaps, according to HSBC Mutual Fund.
