The recent performance of the Nifty 500 illustrates a growing disparity in the strength of headline indices, with over half of its constituents lagging behind key benchmarks. This trend persists even as the Nifty 50 and Sensex recently reached record highs.
On December 1, 2025, the BSE Sensex marked a new peak at 86,159.02, while the NSE Nifty 50 climbed to an all-time high of 26,325.80. Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that the NSE 500 has risen by 19.2 percent since the lows in March, outpacing the Nifty’s 17.7 percent increase during the same period. This slight outperformance of the NSE 500 is attributed to stronger earnings growth among mid-cap stocks compared to large-cap stocks.
Despite the steady recovery of benchmark indices from their March lows, many stocks within the broader market continue to struggle. Hitesh Tailor, a Research Analyst at Choice Equity Broking, pointed out that the NSE Nifty 500 is revealing a clear market bifurcation, where only a select group of stocks are consistently reaching or remaining near their 52-week highs. In contrast, a significant number of stocks in the mid- and small-cap segments are close to their 52-week lows, particularly those that experienced prior excessive price gains relative to their fundamentals.
The current market environment reflects a rotational trend rather than a broad rally. Investors appear to favor companies with predictable earnings and robust balance sheets, leading to concentrated leadership within specific sectors. A recent analysis by Samco Securities indicated that only three sectors—finance, healthcare, and automobiles—have more than half of their constituents trading above the 200-day simple moving average (SMA), a marker of relative strength and sustained momentum. Although banks show some resilience, they remain below the 50 percent threshold concerning long-term averages.
Conversely, several sectors, including power, FMCG, real estate, infrastructure, construction materials, chemicals, retail, and iron and steel, demonstrate exceptionally weak breadth, with fewer than 20 percent of stocks trading above their 200-day SMA. This trend signals ongoing consolidation or market pressure.
The limited sectoral breadth underscores that the current market rally is primarily driven by a handful of large-cap stocks rather than a widespread upswing across the market.
Looking ahead to 2026, analysts at Choice Equity Broking anticipate that the market will maintain a selective tone rather than a broadly bullish atmosphere. Large-caps, buoyed by stable earnings profiles and substantial institutional inflows, are expected to lead the next market phase. Meanwhile, mid-caps may experience selective gains in sectors such as industrials, manufacturing, energy transition, and services, where earnings remain robust. Small-caps, on the other hand, are likely to remain volatile due to liquidity constraints and uneven earnings.
A more sustainable, broad-based rally may only materialize if economic indicators strengthen and earnings visibility improves across sectors.
Published on December 5, 2025
