On 27 November 2025, the Indian equity benchmarks Nifty 50 and BSE Sensex surged to fresh all-time highs after 14 months. The Nifty climbed to 26,306.95 while the Sensex crossed 86,000, driven by optimism around India’s economic resilience and improving macro indicators.

However, despite these headline milestones, many investors are experiencing a very different reality. Portfolios across the country do not reflect the same enthusiasm shown by the indices. This disconnect has left retail investors wondering: if the market is at an all-time high, why does my portfolio look flat or even negative ?

The answer lies in the nature of the current rally. It has been narrow, selective, and dominated by a small group of heavyweight stocks.

A Narrow Rally : Headline Indices Up, Broader Market Lagging

While the Nifty and Sensex have soared, the broader markets tell a different story. Mid-cap and small-cap indices have significantly underperformed this year. The BSE MidCap index has gained only around 1.44 percent in 2025, and the BSE SmallCap index is down nearly 6 percent.

Even after recent recoveries, mid-caps remain more than 5 percent below their previous highs, while small-caps are nearly 10 percent lower. Only a limited number of stocks have participated in this uptrend.

This trend is visible within the Nifty 50 itself. Out of the 50 stocks in the index, barely half have contributed meaningfully to the recent rise. Many large companies—including some in technology, consumption, and discretionary sectors—remain 20 to 40 percent below their all-time highs. Large, well-known names like TCS, Tata Motors, and Trent provide examples of significant underperformance despite generally stable fundamentals.

The Nifty Next 50 index has also remained stuck, trading 10 to 20 percent below its peak for over a year.

Market breadth indicators confirm this divergence. In the small-cap segment, for example, the number of declining stocks has consistently outpaced the number of gainers, signaling persistent pressure.

This pattern is characteristic of a narrow rally, where a small group of large-cap stocks drives the index upward, while the majority of the market lags behind.

Why the Rally Feels So Selective

Several factors explain why this rally has not translated into gains for most portfolios.

Preference for Stability

In times of macroeconomic uncertainty, investors gravitate toward large, stable companies with strong cash flows, predictable earnings, and high institutional ownership. This shift creates a concentration of buying in a handful of large caps, leaving mid- and small-caps behind.

Valuation Concerns

Mid- and small-cap stocks had run up sharply in previous years, leading to stretched valuations. In 2025, these segments faced correction pressures as mutual fund flows weakened and liquidity tightened. Redemptions and rebalancing worsened the decline.

Uneven Earnings Recovery

Corporate earnings have improved, but not uniformly across sectors. Banks, telecom players, and select cyclicals have driven most of the gains. Many mid- and small-cap companies, particularly in consumption-driven categories, have seen slower earnings growth, keeping investors cautious.

What This Means for Investors

If your portfolio feels disconnected from the headline indices, it is not a personal failure. It reflects the structure of the current rally.

Here are the key takeaways:

1. A rising Nifty does not guarantee broad-based wealth creation.

2. Investors with significant mid- and small-cap exposure will naturally see muted performance in a narrow market.

3. Recovery in these segments often lags the large-cap cycle by several months.

4. Long-term investors should continue disciplined allocation, especially through SIPs or staggered investments.

5. Diversification across market caps and sectors remains critical in avoiding concentration risk.

What Could Turn the Trend Around

For the rally to broaden and lift the wider market, several triggers are needed:

• A stronger and more broad-based corporate earnings recovery.

• Improved liquidity in the mid- and small-cap segments.

• Stabilizing interest rates and consistent macroeconomic cues.

• Renewed retail and institutional flows into diversified equity mutual funds.

• Valuation moderation making mid- and small-caps attractive again.

If these conditions fall into place, the next leg of the rally could be more inclusive, helping portfolios across the risk spectrum.

Conclusion

India’s benchmark indices hitting new highs is an important milestone, but it does not tell the full story. The current market strength is concentrated in a narrow set of large-cap stocks, leaving much of the broader market and most investor portfolios underwhelmed.

While this may feel discouraging, the long-term trajectory still depends on earnings, liquidity, and broader economic participation. Staying diversified, disciplined, and patient is the most effective strategy, especially during phases when headline numbers do not reflect the experience of individual investors.