Smallcap underperformance to end soon; 20 25% upside likely by Dec 2026: InCred Equities

InCred Equities on Tuesday said the recent underperformance in smallcap index is likely to end soon and an upside of 20-25 per cent is likely on the index by December 2026, offering investment opportunities. The Smallcap index witnessed a 15-year ascending trendline breakout in 2023, which resulted in a significant upside. It later witnessed a strong price correction in March this year and since then the index has been undergoing time correction. "Interestingly, the index bounced back sharply after retesting the multiyear breakout implying the worst seems over and it can pick up strong momentum in coming months. The RSI has also bounced from strong support zone with early signs of hidden bullish divergence which supports the postulate of a strong upside," InCred Equities said. The brokerage said the overall strength remains same in other smallcap indices, but the Smallcap100 index was chosen for the study due to its long price history. InCred said large cap stocks have not only witnessed strong gains but also exhibited marked outperformance of late. On the weekly timeframe, Nifty Smallcap 100 seemed to have completed a small wave 1, implying it can cross previous life high to complete wave 3. "It can move 20-25 per cent from current levels to complete the larger wave 5. The index is also forming an Inverse Head and Shoulder pattern with breakout confirmation on close above 19,200 levels. The pattern target syncs with the Elliot wave target of 21,300-22,200 levels," InCred said. A broader index, Nifty MidSmallcap 400, traded in an ascending channel pattern since 2022 and is currently on the verge of a consolidation breakout, which once confirmed can result in a strong upside. The index seems to have completed a smaller wave 2 pattern which supports the overall expectations of 20-25 percent upside in a year, InCred said. Meanwhile, on Nifty, the brokerage said: "The index has witnessed a smart bounce after retesting a major swing high breakout in 0.5 percent brick size Renko charts suggesting a strong upside in the coming months. While the proportions of the upside may not be as large as smallcap index, a continued upmove in Nifty Total Market index is likely to keep the trend strong going forward," it said.