Bucking the Trend: 8 smallcaps rally up to 55% despite FII & MF selling – News Air Insight

Even though major investors like foreign institutional investors (FIIs) and mutual funds reduced their stakes in many small cap companies during the June 2025 quarter, some of these stocks have surprisingly bucked the overall market trend. Despite the pressure from these big sellers, a handful of smallcap stocks have managed to rally strongly, with gains reaching as high as 55% in less than three months.

According to ACE Equity data, 143 smallcap stocks saw both FIIs and MFs trim their stakes in the June quarter compared to March 2025. The impact of this institutional slash holding was visible around 93 of these stocks have posted negative returns so far in the September quarter (July–September 2025).

Stocks like Dreamfolks Services, Voltamp Transformers, Praj Industries, Suraj Estate Developers, and Share India Securities were among the worst performers in this group, falling 20–40% during the three-month period.

However, not all smallcaps followed the script. Despite the institutional sell-off, 19 stocks have delivered double-digit gains, signaling selective investor confidence or strong business fundamentals.

Among them, 8 smallcap stocks surged over 30%, with three names — Netweb Technologies India, Rishabh Instruments, and Ashapura Minechem — gaining between 40–55%. Other notable gainers include, RateGain Travel Technologies, Tilaknagar Industries, Nesco, Indian Metals & Ferro Alloys, and Sanghvi Movers, these stocks have rallied 30–40% in less than 90 days.

Smallcaps with Solid Fundamentals That Are Bucking the Institutional Sell-Off

According to Trendlyne’s SWOT analysis, several of the best-performing smallcap stocks exhibit a set of strong fundamental traits. These include consistent earnings growth, low or no debt levels, improving return ratios such as Return on Equity (RoE) and Return on Capital Employed (RoCE), and a track record of rising profitability. Additionally, many of these companies have avoided pledging promoter shares, a factor often viewed positively by investors.

Netweb Technologies India stands out for its robust quarterly earnings growth and a healthy balance sheet with low debt. The company has shown consistent improvement in annual net profits and book value per share over the past two years, with no promoter pledge, further reinforcing investor confidence.

Rishabh Instruments has also demonstrated strong financial health, with expanding profit margins on both a quarterly and trailing twelve-month basis. Its revenue has been growing steadily for the past two quarters, supported by a low-debt structure and zero promoter pledge — signs of solid operational performance and corporate governance.

Ashapura Minechem is among the top return-generating smallcaps over the past five years. It boasts high TTM (trailing twelve-month) EPS growth and has maintained a consistent rise in annual net profits and book value. Like the others, it has no promoter pledge, which adds to its credibility.

RateGain Travel Technologies has delivered strong performance with a completely debt-free balance sheet. Its profitability and book value have been improving consistently for more than two years. Moreover, both RoE and RoCE have shown positive trends, indicating efficient capital utilization.

Lastly, Tilaknagar Industries has recorded steady growth in both revenue and profit on a quarterly basis. The company maintains low debt levels and, like its peers, does not have any promoter pledge — an important marker of financial and management strength.

Also Read: 15+ MFs add these 10 stocks in August’25; 4 stocks rally over 50% in FY26

Commenting on the recent trend in FII activity, VK Vijayakumar, Chief Investment Strategist at Geojit Investments, attributed the ongoing outflows to relatively high valuations in Indian equities compared to other Asian markets such as China, Hong Kong, and South Korea. He noted that this valuation gap has prompted foreign investors to shift their focus toward these more attractively priced markets — a strategy that has paid off so far in 2025, as those regions have significantly outperformed India year-to-date.

However, Vijayakumar believes the tide could be turning. He pointed out that India’s economy has shown strong signs of recovery, particularly with a robust GDP growth print in Q1. In addition, recent policy measures — including budget-driven tax cuts, accommodative rate cuts by the Monetary Policy Committee (MPC), and GST rationalisation — could help sustain the country’s growth momentum. While earnings growth is expected to be moderate at 8–10% in FY26, he anticipates a sharper acceleration to over 15% in FY27.

According to him, the market is likely to start factoring in these positives well in advance, potentially setting the stage for a rally that could push the Nifty to fresh record highs within the year. In such a scenario, he expects FIIs to return as net buyers in Indian equities.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)