Mid-cap shares see sharp decline in 2025. Time to take shelter in large-caps now? What consultants recommend

After having fun with robust returns over the previous couple of years, mid-cap and small-cap shares have come beneath important promoting strain in 2025, with many consultants now advocating a shift in the direction of large-cap shares amid the continuing market downturn.

The Indian inventory market has been grappling with heavy promoting strain this yr as a consequence of relentless overseas capital outflows, weak company earnings, and the rupee hitting report lows in opposition to the greenback. Including to investor issues, U.S. President Donald Trump not too long ago introduced recent tariffs on commerce companions, fueling fears of a possible commerce struggle that might gradual world financial development and drive inflation larger. 

Mid-caps underperform Nifty in 2025

The mid-cap phase has considerably underperformed the broader market in 2025 thus far. The Nifty Midcap index has dropped over 12 per cent in comparison with a 2.5 per cent decline within the benchmark Nifty index throughout this era.

The sell-off has been notably extreme this month, with the Nifty Midcap index falling one other 6 per cent after declining 6 per cent in January 2025. In distinction, the Nifty is down 2 per cent in February thus far after slipping 0.6 per cent in January.

Specialists had beforehand warned that broader market valuations have been reaching unsustainable ranges, resulting in an anticipated slowdown. Now, a number of analysts are advising warning and recommending a shift towards large-cap shares.

“In contrast to 2024, when returns have been largely front-loaded, 2025 is anticipated to see a reverse development, with excessive volatility within the first half and returns being backloaded. Market consolidation is probably going within the close to time period, with an additional narrowing of breadth. Shares with resilient enterprise fashions, earnings visibility, and robust administration will proceed to command premium valuations,” stated Neeraj Chadawar, Head – Basic and Quantitative Analysis, Axis Securities.

Mid-caps vs large-caps: The place to take a position?

With mid-cap shares dealing with persistent promoting strain, market individuals are assessing whether or not a restoration is probably going later this yr or if shifting focus to large-cap shares is a extra prudent strategy.

Based on Devarsh Vakil, Head of Prime Analysis at HDFC Securities, buyers ought to undertake a selective strategy, emphasising large-cap shares, that are anticipated to ship superior risk-adjusted returns in comparison with mid- and small-cap indices. He attributes this to stronger earnings development and extra enticing valuations within the large-cap house.

V Okay Vijayakumar, Chief Funding Strategist, Geojit Monetary Providers highlighted the continuing development of large-cap shares outperforming mid- and small-cap shares, anticipating this divergence to persist.

The analyst famous that sustained promoting by overseas institutional buyers (FIIs) has introduced large-cap valuations to extra affordable ranges, whereas mid- and small-cap shares stay costly. 

Vijayakumar additional prompt that buyers give attention to high quality large-cap shares in banking, IT, autos, pharma, and capital items, as these are prone to entice FII inflows as soon as sentiment shifts. 

Efficiency of mid-cap shares in 2025

Within the Nifty Midcap 100 index, solely 13 shares have delivered constructive returns thus far in 2025, whereas the remaining 87 have recorded losses.

Prime mid-cap losers

Kalyan Jewellers, with a 33 per cent decline, is the largest loser from the mid-cap pack, adopted by Godrej Properties, Polycab India, Oberoi Realty, Oracle, Voltas, PB Fintech and Paytm which have shed 25 per cent or extra.

JSW Infrastructure, TI India, Status Estates, Mangalore Refinery and Apollo Tyres are amongst different high mid-cap losers, shedding over 20 per cent.

Prime mid-cap gainers

SRF and UPL, alternatively, have emerged as high gainers within the mid-space, rising 20 per cent.

Vodafone Thought, SBI Playing cards, M&M Finance, Sundaram Finance, L&T Finance, AU Small Finance Financial institution, Muthoot Finance, Nykaa, Indus Towers, Bharat Dynamics, and Patanjali Meals are buying and selling constructive on a year-to-date foundation. 

Disclaimer: The views and suggestions made above are these of particular person analysts or broking firms, and never of Mint. We advise buyers to verify with licensed consultants earlier than taking any funding selections.