Smallcap Underperformance Set to End: InCred Equities has projected that the recent underperformance of smallcap stocks is likely to end soon, with the Nifty Smallcap 100 index expected to deliver a potential upside of 20-25% by December 2026, creating attractive investment opportunities.
The Nifty Smallcap 100, on a weekly timeframe, appears to have completed a small wave 1, indicating that it could surpass its previous all-time high to complete wave 3. According to InCred Equities, the index experienced a 15-year ascending trendline breakout in 2023, which led to significant gains, followed by a strong price correction in March 2025. Since then, the index has been undergoing a period of consolidation and time correction.
“Interestingly, the index bounced sharply after retesting the multiyear breakout, suggesting that the worst of the decline is over. The RSI has rebounded from a strong support zone, showing early signs of hidden bullish divergence, which supports expectations of a strong upward move,” InCred Equities noted.
While the overall strength remains robust across other smallcap indices, the Smallcap 100 index was highlighted due to its long price history and technical reliability.
On the technical front, the index is forming an Inverse Head and Shoulders pattern, with breakout confirmation expected on a close above 19,200 points. The pattern’s target aligns with the Elliott Wave projection of 21,300-22,200 points, which supports the anticipated 20-25% upside.
Meanwhile, the Nifty MidSmallcap 400 index has been trading within an ascending channel since 2022 and is now on the verge of a consolidation breakout. The completion of a smaller wave 2 pattern on this index further strengthens the bullish outlook.
For broader markets, the brokerage said that large-cap stocks have recently exhibited strong gains and outperformance. The Nifty Total Market index has also rebounded sharply after retesting a major swing high on 0.5% brick size Renko charts, suggesting that while smallcaps may lead in upside, the overall market trend remains positive.
With these technical signals, smallcap investors could see significant opportunities in the coming months, while broader midcap and large-cap indices are expected to continue supporting market momentum through 2026.
