The Nifty Midcap 100 Index hit a record high on Tuesday, closing at 64,162.9, up 0.54 per cent from the previous day. The index was lifted by stocks such as Vodafone Idea, which rose 8 per cent, Paytm, which gained 5.8 per cent, and Indian Renewable Energy Development Agency, which was up 4.5 per cent. Over the past year, the index has gained 11 per cent, compared with a 2.5 per cent decline in the Nifty 50, which is 7.6 per cent below its all-time high close of 26,329 recorded eight months ago.
The Nifty Midcap 100 follows the Nifty Smallcap 100, which closed at a record high of 19,978 on August 21, up 11 per cent over the past year.
The Nifty Midcap 100 now trades at a price-to-earnings (P/E) multiple of 33.8x, making the index expensive. But analysts and fund managers feel this is the only segment that has witnessed real growth. Over the past year, the Midcap 100’s earnings per share (EPS) has risen 23 per cent, while Nifty EPS is up 11 per cent. It is also a segment that is relatively less affected by global events and caters largely to the domestic market.
The current P/E multiple is well below its unprecedented high of 44x in September 2024. However, the present levels remain a concern. “There is momentum in midcaps and smallcaps. This momentum is driven by improving earnings growth, as reflected in the 2026-27 first quarter (April-June/Q1) numbers, and better-than-expected guidance by many companies in the broader market. Institutional investment, both domestic and foreign, in midcaps is also growing. But the area of concern is the high valuations,” said V K Vijayakumar, chief investment strategist, Geojit Investments.
When the US went to war with Iran in February this year, the Nifty Midcap 100 Index took a huge hit, falling 11 per cent in a month. The Nifty 50 also fell 11 per cent in February but is now up only 9 per cent. This is partly because the Nifty 50 has faced heavy selling by foreign institutional investors in the largecap space.
Midcaps, on the other hand, have told a story of resilience and domestic demand. Since March this year, stock prices of companies such as Laurus Labs, One 97 Communications (Paytm), and Radico Khaitan have risen 80 per cent.
Midcap funds that invest in these companies are also receiving large amounts of systematic investment plan money.
As of July, midcap funds had total assets under management (AUM) of ~5 trillion, compared with ~4 trillion for largecap funds. As inflows into midcap funds continue to rise, they could drive valuations of these stocks even higher.
“Earnings are strong, but valuations are priced to perfection, leaving very little margin for error. Investors will have to be stock-specific and will have to wait for some time. Earlier, companies benefited from low-cost inventory, but now, in the second quarter (July-September/Q2), we will have to see how much pricing power these companies have and whether they can sustain their margins, as oil has also run up,” said Anish Teli, managing partner, QED Capital Advisors.
